The company was distributing an Android application providing access to games, but when installed, a text message was sent from the user's handset to a premium-rate number at the additional cost of £10.
Connect Ltd, which trades as SMSBill, states in its terms and conditions that "charges of about £5" are incurred upon installation, and was thus adjudged to have misled customers.
PhonepayPlus ordered the developer to refund all affected customers within the next three months, and submit all future proposals for premium-rate services for review before rolling them out in the UK.
Paul Whiteing, chief executive of PhonepayPlus, said: "PhonepayPlus has a strong track record of protecting consumers from misleading apps that charge using premium rate services.
"We will continue to work with the telecoms and security industries to understand threats to consumers and to take robust regulatory action where appropriate.
"We want to make sure phone users can use apps with confidence."
Connect Ltd could face an even bigger fine if it fails to refund customers within the set time frame.