There were a few reasons for the sale, and how it went down.

First of all, only Norway had a commercial producer of heavy water during that period, when Israel was seeking to secure it. Israel approached both Norway and the US, seeking roughly 20 tons of heavy water for its nuclear program. The US, however, requested significant additional controls above existing nuclear agreements with the US, so Israel lost interest.

Norway seemed amenable to a sale, but said there would be a delay until at least the end of 1960 due to existing orders. Israel eventually gave up on the American route in 1957 or so, knowing it was fruitless and the safeguards would be too much for Israel's goals of a nuclear weapons program. Israel made more formal requests to Norway in 1957, and engaged in heavy diplomacy; Norway was, at the time, quite sympathetic to Israel already. Much of the information about the Norwegian supply was and is classified, so the story and why Norway made the sale remains somewhat speculative. Avner Cohen, for example, suggests that it's possible that the Norwegians thought it was all for Israeli energy needs, and some letters describing the point of the Dimona reactor reinforce that.

Norway didn't part with the heavy water without any conditions, though there was a moment where it almost did. So when it sold the heavy water, it was in the context of an agreement that Israel would use it for purely peaceful purposes, and that Norway could ascertain if this was being followed in the future. The 20 tons sold, as Mordechai Vanunu's revelations showed, were probably part of a batch that was not used for purely peaceful purposes. This became a hot political issue in Norway, but Norway obviously has never been allowed to exercise inspections, as were contemplated in the original agreement.

Norway was not the only country to sell Israel heavy water, but the 20 tons were certainly significant. The US also supplied four tons of heavy water in 1963, when Dimona began operations.

At one point, Norway did seek to insist on the inspection rights. In response, Israel chose to sell the heavy water back to Norway in 1990, and it sold back roughly 10.5 tons, what was left after "normal use and evaporation". This was not long after the Vanunu revelations, which likely prompted the renewed calls for investigation. Norway also was dealing with other export control issues related to heavy water, since it was suspected that some reached India and its nuclear program. So Norway sold it because it was a heavy water exporter, it was a commercial supplier, and it was an ally of Israel, while also thinking that it was related to energy rather than weaponry. But it wasn't alone, as the US also supplied a small amount around the same time.