Shares in the Japanese automaker slid more than 4 percent in early trade on the news, which was first reported in the Asahi newspaper on Wednesday. The benchmark Nikkei average was down 0.7 percent.
Subaru, which exports the majority of its domestically made cars, said it was still in the process of identifying where the defect was, and could not say when production would resume.
Output has been halted since the night shift on Jan. 16, it said.
The Asahi said the defect was found in the power steering unit, but Subaru said that had not been confirmed. The newspaper said the impact on production so far likely exceeds 10,000 units, and that delays were starting to be seen in delivery to customers.
Subaru is reeling from fresh recalls in Japan due to new cases of inspection cheating. In November, it slashed its profit forecast by a quarter citing rising recall costs.
A day before the stoppage, Subaru had announced production and sales plans for this year, saying it planned to build 650,000 vehicles in Japan, and 1.03 million globally.
It has forecast record global sales of 1.08 million vehicles, of which 700,000 are expected to come from the profitable U.S. market.