Judge Baltasar Garzon, an investigating magistrate, said in a ruling on Wednesday that Berlusconi can now be included in the probe into tax fraud and illegal share dealing in Spanish TV station Telecinco, which is controlled by the Italian magnate's Mediaset group.
Several of Berlusconi's former business partners are already on trial in Spain in the case.
Garzon suspects Berlusconi of covering up a tax fraud of $138 million (€108 million) between 1990 and 1993 while he was vice-president of Telecinco.
Garzon, who gained worldwide notoriety when he ordered the arrest of Augusto Pinochet, the former Chilean leader, first began the investigation in 1997, but was stymied because Berlusconi had immunity first as a member of the European Parliament and from 2001 as Italy's prime minister.
Garzon eventually suspended his probe, but declined to drop it altogether, saying it would remain on hold while Berlusconi was in office.
Berlusconi, 69, went to court in Spain in 2002 to try to have the case thrown out, but Spain's constitutional court sided with Garzon.
Lawyers for Berlusconi said he still has immunity because he has been nominated to be a member of an assembly affiliated with the Council of Europe, the continent's top human rights group.
But Garzon said that would not be enough to keep him from reopening the inquiry.
String of cases
Wednesday's court case is the latest in a string involving the former prime minister who is also Italy's richest man.
In July, an Italian judge ordered Berlusconi to stand trial for alleged fraud at Mediaset.
That case, which Berlusconi dismissed as politically motivated, followed a four-year investigation into claims of embezzlement, false accounting, tax fraud and money laundering in television rights deals between 1994 and 1999.
Berlusconi has so far managed to avoid jail in at least seven previous graft trials.
He was found guilty four times, but verdicts were overturned on appeal or the statute of limitations applied and charges were dropped.
Italy's longest-serving post-war prime minister was defeated in April elections - a razor thin result which Berlusconi said was fraudulent.