Friday's decision was expected after a parliamentary committee last week unanimously recommended dropping coal investments.
The new guidelines, which will take effect by Jan. 1, 2016, call on fund managers to exclude mining or power companies that depend on coal for at least 30 percent of their activities or revenues.
Greenpeace and other environmental groups advocating divestment from fossil fuels celebrated the move as a critical step. They estimated the decision could affect investments of $8.6 billion in 122 companies.
Norway deposits surplus wealth from its oil and gas sector in the sovereign wealth fund as a buffer for when its offshore wells run dry.