The Glassy Junction, on Willenhall Road, has been fined £1,000 by West Midlands Police after being found open and trading to the public during Diwali.
The pub was given the fixed penalty notice after police officers witnessed the breach of coronavirus restrictions on Saturday, November 14.
The officers found that fireworks had been set up and food and drinks were being served, despite all hospitality venues being banned from operating under current national restrictions.
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Members of the public who were in attendance were issued with £200 fines, with the pub, which is formally known as the Malt Shovel, also being issued with a prohibition notice from Wolverhampton Council.
The prohibition notice has been served to prevent any future breaches of the current restrictions and the council is preparing to submit a review of the premises licence.
Councillor Steve Evans, cabinet member for city environment at Wolverhampton Council, spoke about the work the police and council were doing to keep the public safe during the pandemic.
He said: "I would like to thank officers for their hard work in trying to keep the public safe.
"As a council, we have issued lots of advice and have worked with businesses in the hospitality sector to ensure they follow the Government rules.
"I'm pleased to say the vast majority of businesses in Wolverhampton have done so.
“Unfortunately, a small number continue to flout the rules and leave us no choice but to act in order to protect the public.”