A defiant DeLay on Wednesday insisted he was innocent and called the prosecutor a "fanatic". DeLay, a conservative Republican, is the first House leader to be indicted while in office in at least a century, according to congressional historians.
He was accused of a criminal conspiracy along with two political associates, John Colyandro and Jim Ellis.
The indictment accused DeLay, 58, of a conspiracy to violate Texas election law, which prohibits use of corporate donations to advocate the election or defeat of political candidates.
The alleged scheme worked in a roundabout way, with the donations going to a DeLay-founded political committee, then to the Republican National Committee and eventually to Republican candidates in Texas.
"I have done nothing wrong ... I am innocent," DeLay told a Capitol Hill news conference in which he criticised the prosecutor, Ronnie Earle.
DeLay called Earle an "unabashed partisan zealot" and a "fanatic".
In Austin, Texas, Earle said: "Our job is to prosecute abuses of power and to bring those abuses to the public."
DeLay said he would step aside
temporarily from his post
The indictment against the second-ranking and most assertive Republican leader is expected to have immediate consequences in the House, where DeLay is largely responsible for winning passage of the Republican legislative programme.
It is the latest in a series of recent setbacks for the Republican Party, which controls both chambers of Congress and the White House.
Senate Majority Leader Bill Frist also is fending off questions of ethical improprieties stemming from Frist's sale of stock in HCA Inc, the hospital operating company founded by his family.
Last week, a former White House official was arrested in the investigation of Jack Abramoff, a high-powered lobbyist and fundraiser.
Blow for Bush
The troubles come at a time that President George Bush faces the lowest approval ratings of his presidency because of his handling of the Iraq war and the Hurricane Katrina response.
White House spokesman Scott McClellan said Bush still considers DeLay a friend and effective leader in Congress.
"Congressman DeLay is a good ally, a leader who we have worked closely with to get things done for the American people"
White House spokesman
"Congressman DeLay is a good ally, a leader who we have worked closely with to get things done for the American people," McClellan said. "I think the president's view is that we need to let the legal process work."
Republican congressional officials said Speaker Dennis Hastert, the top House Republican, will recommend that Representative David Dreier of California step into DeLay's duties. Some of the duties may go to the Republican whip, Representative Roy Blunt of Missouri, the No 3 Republican in the House.
The Republican rank and file may meet as early as Wednesday night to act on Hastert's recommendation. DeLay retains his seat representing suburbs southwest of Houston.
If convicted of criminal conspiracy, DeLay could be sentenced to six months to two years in a state jail and a receive fine of up to $10,000. The potential two-year sentence forced DeLay to step down under House Republican rules.
Kevin Madden, DeLay's spokesman, dismissed the charge as politically motivated.
"This indictment is nothing more than prosecutorial retribution by a partisan Democrat," Madden said, citing prosecutor Ronnie Earle, a Democrat.
Madden later added: "They could not get Tom DeLay at the polls. They could not get Mr DeLay on the House floor. Now they are trying to get him into the courtroom. This is not going to detract from the Republican agenda."
DeLay is the third Congressman
to be indicted since 1996
The indictment accused DeLay of a conspiracy to "knowingly make a political contribution" in violation of Texas law outlawing corporate contributions. It alleged that DeLay's Texans for a Republican Majority political action committee accepted $155,000 from companies, including Sears Roebuck, and placed the money in an account.
The PAC then wrote a $190,000 cheque to an arm of the Republican National Committee and provided the committee a document with the names of Texas State House candidates and the amounts they were supposed to receive in donations.
DeLay is the third member of Congress to be indicted since 1996. Former Republican representative William Janklow was convicted of vehicular homicide and sentenced to 100 days in prison after his car struck and killed a motorcyclist in 2003.
Former Democratic Representative James Traficant was sentenced to eight years in prison after being convicted on charges from a 2001 indictment accusing him of racketeering and accepting bribes.
Democrats have kept up criticism of DeLay's ethics, citing three times last year that the House ethics committee admonished DeLay for his conduct.