Staff Sergeant Robert Bales, of the 2nd Battalion, 3rd Infantry, was also accused of six counts of assault and attempted murder in the Panjwai district of Kandahar province earlier this month.
The massacre, in which most of the victims were women and children, is believed to be the deadliest war crime by a NATO soldier during the decade-long conflict and has further strained the already difficult relationship between Washington and Kabul.
The US military statement said that under the its code of justice, "the maximum possible punishment for a premeditated murder conviction is a dishonourable discharge from the Armed Forces, reduction to the lowest enlisted grade, total forfeiture of pay and allowances, and death".
The mandatory minimum sentence is life imprisonment with the possibility of parole, it added.
There are six US servicemen currently on military death row, but no executions have been carried out for around 50 years, officials said.
Bales, 38, is currently being held at Fort Leavenworth in Kansas, and a US forces spokesman said it was "more than likely" the trial would be held in the United States, although no decision had yet been made.
The next stage will be for Bales to appear before a so-called Article 32 hearing, which will decide whether to proceed with the charges -- but the military has almost four months in which hold it.
A spokesman for Afghan President Hamid Karzai said: "We want justice and we want it as soon as possible."
Relatives of the victims have demanded the proceedings take place in Afghanistan.
A US official told AFP that the murder victims were nine children, four women and four men, with four children, one man and one woman wounded.
After the massacre it was widely reported that 16 people had been killed, but the US military spokesman said: "The evidence available to the prosecution team indicates 17 victims of premeditated murder."
All 17 had died at or around the time of the incident, he added, denying rumours that one of the injured had succumbed in hospital, or that one of the women victims was pregnant.
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@MarkH: Very well and impressive said but unfortunately and unluckily you are camouflaging the truths and realities about the innocent killings of the muslims on the name of fake terrorism from the world and are only winning media war in Afghanistan.
@Ahmer Ali: Well that's a bold faced lie. Considering a soldier would know better than you, you just tried and failed to post anything of substance.
@US Soldier: Mr. US Soldier you keep it in your mind firmly and strongly that you are killing only majority of innocent muslims in Afghanistan and have killed also in Iraq on the name of fake terrorism and you should think about it.
@MUSLIM PAKISTANI:
What else do you expect? They are an occupying force. An occupying force and its attached media (CNN, BBC, Fox, Skynews etc.) do not have words like "impartial" or "justice" in their dictionary.
This is a warning to Pakistanis too
I'm sure the liberals will find a way to justify his "innocent" act.
What I fail to understand is why are the eyewitness reports are being ignored? There is solid evidence against the military, relatives of the victims clearly testified there were SEVERAL soldiers then why does the US reiterating it was one soldier, and have charged ONE SOLDIER? How can one soldier murder and burn 17 victims without any support? People aren't stupid, but the media is one eyed and is only reporting the American version of the massacre. We want eyewitness accounts not the usual baloney we're handed down since years!
There are lot of innocents being killed by coalition forces and this was one of those sad incidents which got international attention just because they were unable to hide themselves from this, I m not Impressed i know he wont be prove guilty