Attorney General Avichai Mandelblit "decided to file charges against the Prime Minister Benjamin Netanyahu for offences of receiving a bribe, fraud, and breach of trust," a ministry statement said.
It said a note of the decision and a copy of the charges had been provided to the premier's lawyers.
Netanyahu, who strongly denies all the charges, becomes the first Israeli prime minister to be indicted while in office.
Mandelblit is due to give a public statement at 1730 GMT, with Netanyahu expected to respond.
New Israel elections loom as Gantz says can't form govt
Netanyahu is not legally required to resign, only if convicted with all appeals exhausted, but political pressure is likely to be intense.
Netanyahu may now ask the Israeli parliament, or Knesset, to grant him immunity from prosecution.
Rightwinger Netanyahu, who has been in power since 2009, is Israel's longest-serving prime minister and dominates the country's political scene.
The decision comes as Netanyahu, a close ally of US President Donald Trump, is fighting for his political life.
Israeli been without a government for nearly a year, with neither Netanyahu nor his centrist rival Benny Gantz able to form a coalition government following deadlocked elections in April and September.
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