Mr Netanyahu is suspected of accepting gifts, including cigars and champagne, from wealthy businessmen and dispensing favours in return for favourable media coverage.
It is the first time a serving Israeli PM has been put on official notice of a planned prosecution and could face up to ten years in prison if found guilty. He denies the charges.
In a TV address, he said that he wanted the country, not the courts, to decide if he should run the government, saying the charges were an attempt to frame him.
The announcement effectively turns the upcoming election into a referendum on whether or not he should be given immunity or face the corruption charges.
However, polling shows that the majority of Israelis oppose giving the prime minister immunity.
Benny Gantz, Mr Netanyahu’s main political rival, responded to the announcement by saying: “I never imagined that we would see the day that the prime minister of Israel would avoid standing before the law and the justice system.”
Mr Gantz added: “Today it’s clear what we’re fighting for. Netanyahu knows he’s guilty.”
Israel faces further uncertainty after two elections last year failed to yield a governing coalition. It is unclear whether a politician who has been indicted can form a government after new elections, or if a sitting prime minister should resign after being charged with a crime.
The country’s Supreme Court began work on those questions on Tuesday. However, with the decision likely to have major political implications, it did not say when a ruling would be issued.
The 70-year-old, who has been the country’s leader for the last decade, failed to outright win two elections last year, or form a ruling coalition, meaning Israel’s political deadlock is becoming increasingly difficult to break.
