It said had been advised by its lawyers that the company's conduct "gives rise to legal claims under German law".
Volkswagen admitted last year that it had installed secret software to cheat US emissions tests.
The move, from one of VW's biggest investors, is the latest in a flood of legal actions over the scandal.
It faces action from US Department of Justice, the Federal Trade Commission and its own dealers.
Norges Bank Investment Management is worth $850bn (£592bn; €751bn) and has stakes in more than 9,000 companies.
According to the Financial Times, which first reported the story, the lawsuit is expected in the coming weeks. It will be filed in Germany, joining class-action cases which are being prepared there.
"Norges Bank Investment Management intends to join a legal action against Volkswagen arising out of [the fact that] the company provided incorrect emissions data," the statement, seen by Reuters news agency, said.
"As an investor, it is our responsibility to safeguard the fund's holding in Volkswagen."
Volkswagen has put aside some €16.2bn to pay for the emissions scandal.
Last month the German carmaker reached a deal with US authorities in which it agreed to offered to buy-back almost half a million vehicles and provide money for a fund to help develop cleaner car technology.
The Norwegian fund recently announced action to clamp down on excessive executive pay at the companies it invests in, as well as encouraging oil firms to report more on the risks of climate change.