The Collaborative International Dictionary of English v.0.48:

Penalize \Pe"nal*ize\, v. t.
   1. To make penal.
      [1913 Webster]

   2. (Sport.) To put a penalty on. See Penalty, 3. [Eng.]
      [1913 Webster]

WordNet (r) 3.0 (2006):

penalize
    v 1: impose a penalty on; inflict punishment on; "The students
         were penalized for showing up late for class"; "we had to
         punish the dog for soiling the floor again" [syn: punish,
         penalize, penalise]

Moby Thesaurus II by Grady Ward, 1.0:

42 Moby Thesaurus words for "penalize":
   acquit, amerce, anathematize, attaint, blacklist, bring home to,
   bring to account, bring to book, call to account, castigate,
   censure, chasten, chastise, condemn, convict, correct, damn,
   deal with, denounce, denunciate, discipline, doom, excommunicate,
   find guilty, fine, handicap, inflict upon, judge, masthead, mulct,
   pass sentence, pass sentence on, pillory, pronounce judgment,
   pronounce sentence, proscribe, punish, sentence, settle with,
   square accounts, take to task, visit upon