A CBC News investigation found that the reprocessed electronic chips made in China could cause the screens to blank out and leave pilots with blank instrument panels in mid-flight.
The public broadcaster says the department has known about the bogus parts since at least July last year.
After a 14-month investigation, the powerful U.S. Senate armed services committee concluded last year that the counterfeit chips in the Hercules transports and other American-made military equipment are prone to failure with potentially "catastrophic consequences."
Failure of the parts could leave military pilots flying blind with no information on altitude, speed, location, fuel supply, engine performance or even warning messages.
But a spokeswoman for National Defence says that the U.S. manufacturer has not reported failures of the cockpit display units in any aircraft around the world.
Kim Tullipan said in an email that Lockheed Martin has determined there are no safety concerns and no operational limitations.
The parts will be monitored, tested and any non-compliant components will be removed during future maintenance periods at no cost to Canada, she added.
The CBC investigation notes that former associate defence minister Julian Fantino publicly denied last spring that there were fake parts in Canadian aircraft.
"At this point in time, other than continuing to be vigilant, we don't have any particular concerns in this country," Fantino told the CBC.
But internal memos, unearthed for a documentary, contradict his statements.
"Suspect counterfeit parts have been identified by the original equipment manufacturer Lockheed Martin, as being present on several aircraft in their worldwide fleet, including some of Canada's C-130J aircraft."
The memo says the bogus parts are microchips located in the Hercules cockpit displays, and indicates the components would be replaced during future routine maintenance of the aircraft "at no cost to Canada."