Lam, a teacher at Pui Ling School of the Precious Blood, gained widespread media attention after videos of her swearing at police officers during a rally were posted online last month.
The school didn't reveal the details of the penalty, citing privacy reasons. But Lam said her contract with the school would not be affected.
The teacher said she would accept the penality. But she added she was disappointed that in its decision the board did not mention the behaviour of the police at the rally. Lam began yelling at police officers during their confrontation with Falun Gong and Youth Care Association supporters.
"Lam's inappropriate behaviour severely damaged the professional image of teachers as well as our school's reputation," the school said.