The state attorney general's office claimed breach of contract among other charges in the lawsuit, filed in April.
Sig Sauer, based in Newington, New Hampshire, sold 3,000 P229 handguns and various holsters to the New Jersey State Police. The guns arrived in September 2014.
Sig Sauer did not respond to requests for comment.
State troopers testing the weapons found the guns jammed after failing to eject used shell casings, according to the suit.
The guns were found "unfit for police use because a trooper may be unable to fire more than one round of ammunition in a life-threatening situation," the lawsuit says.
New Jersey State Police tried to work with Sig Sauer to repair and replace the guns, according to the suit. It switched to a different gun model after more than a year had passed, citing concerns for trooper safety.
The state originally paid Sig Sauer $1.8 million for the guns. The New Jersey attorney general is seeking a full refund, plus $900,000 to cover the cost of the holsters.
A spokesman for the attorney general declined to comment on the suit.