Sophie Lindley, who uses stabilisers, was cycling on Trent Road, Grantham with dad Dale, when they were stopped.
Police accepted while cycling on pavements was illegal, officers should use discretion with young children.
One cycling charity pointed out being under 10, Sophie is too young to be able to break the law.
Mr Lindley said they regularly let Sophie cycle to school.
"We stopped to look at some ducks when the officer pulled over and said she had to get off," he said.
"He said 'The law is the law' and she was not allowed to ride on the path.
"He said 'If I catch you put her on her bike further up the road I will turn around and confiscate the bike'.
"I couldn't believe it. It's daft."
Sophie's mum Emma Stephenson said she understood it was illegal to ride on the pavement.
"But, it is ridiculous to think a four-year-old is not allowed," she said.
"The most unbelievable thing is they were going to confiscate the bike."
Lincolnshire Police apologised and said: "Safety is our priority and cycling on the pavement is illegal.
"However, common sense obviously prevails and in the case of young children officers should use their discretion and offer the most appropriate advice for the circumstances."
Roger Geffen, of national charity Cyclists' Touring Club, said the officer was "unfair" and "wrong".
"The police officer has forgotten that children under the age of 10 are below the criminal age of responsibility so they can't break laws and can technically ride on the pavement," he said.
"Everyone lets their children ride on the pavement. It is perfectly normal and not criminal."
Parents of a four-year-old girl were baffled when a police officer threatened to confiscate her bike because she was cycling on a pavement.