In a statement, the Taipei district court said Chen's detention was necessary for his trial to go smoothly.
"Out of concerns for human rights and the public interest, Chen Shui-bian should be detained but he should also be allowed to receive visitors," the statement said.
Chen became the first former Taiwanese president to be indicted after prosecutors charged him and more than 10 other family members and aides on December 12 with corruption, forgery and money laundering.
Prosecutors say he and his wife together embezzled $3.12 million from a special presidential fund, and received bribes of $11.73 million in connection with a government land procurement deal and a separate construction project.
An ardent supporter of Taiwan's formal independence from China, Chen has denied any wrongdoing and says he is being persecuted by Ma Ying-jeou, his successor, who came to power in May and has sought warmer ties with the mainland.