The US Army on Thursday said Staff Sergeant Shane Werst, a 31-year-old combat engineer, has also been charged with obstruction of justice.
Werst faces up to life in prison without chance of parole if convicted, officials at Fort Hood in Texas said in a statement.
Major-General James Thurman, commander of the 4th Infantry Division, ordered a general court martial following a pre-trial investigative hearing last month.
Werst was accused initially of fatally shooting Nasir Ismail in the man's home in the Iraqi city of Balad in January 2004.
Prosecutors have said Werst took part in house raids for armed fighters after a US Army captain died in a mortar attack.
Another US soldier accused Werst of planting a gun on the victim's body to make the shooting look like an act of self-defence.
Werst could also face a reduction in rank, forfeiture of pay and dishonourable discharge from the military if convicted.
No trial date has yet been fixed.