Israel's longest-serving premier could face up to 10 years in prison if convicted of bribery and a maximum 3-year term for fraud and breach of trust.
The shock announcement compounded the political chaos gripping Israel which has been without a government for months and faces the prospect of a third election within one year.
His main centre-left challenger in the two elections this year, Benny Gantz, tweeted in response: "There is no coup in Israel, just a bid (by Netanyahu) to hang onto power". The decision announced by attorney general Avichai Mandelblit was the first of its kind against a serving Israeli prime minister and represented Netanyahu's gravest crisis of his lengthy political career.
If he is still in office as prime minister after that, Netanyahu would be under no strict legal obligation to quit.
The prime minister does not deny that he received the gifts, but claims they were from friends and were not repaid via a quid-pro-quo deal and thus not in violation of the law.
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The Case 1000 accuses the prime minister of fraud and breach of trust over allegations of receiving valuable gifts, such as cigars and champagne, from billionaires James Packer and Arnon Milchan between 2007 and 2016, while providing various favours in exchange.
Netanyahu's predecessor, Ehud Olmert, stepped down before he was indicted on corruption charges a decade ago.
A perennial fighter, Netanyahu has outlived many political rivals.
Mr Netanyahu is alleged to have accepted gifts from wealthy businessmen and dispensed favours to try to get more positive press coverage.
But efforts to bring together Likud and Blue and White in a power-sharing agreement collapsed, in part because Gantz's bloc balked at sitting in a government led by Netanyahu while corruption allegations dogged him. Its conflict with arch-foe Iran has deepened - Israeli warplanes hit Iranian targets in Syria on Wednesday after rockets were fired toward Israel - while fighting with Palestinian militants in Gaza flared last week.
On a day of high political drama, dozens of Netanyahu supporters gathered outside his official residency, many holding up pictures of the PM and slogans attacking Mandelblit.