The Ukrainian-born Demjanjuk has lived in the US since 1952. He was sentenced to death in Israel in the 1980s, but was later acquitted and returned to the US.
Demjanjuk is accused of taking part in the deaths of at least 29,000 Jews when he was a guard at the Sobibor Nazi concentration camp in occupied Poland from March to September 1943, the German prosecutor said in a statement.
"There has never been any credible evidence of [Demjanjuk's] personal involvement in even one murder"
John Demjanjuk Jr,
son of the accused
He denies any involvement in the crimes, saying he was a prisoner of war rather than a guard.
In a statement, John Demjanjuk Jr, Demjanjuk's son, said that his father is suffering from a blood disorder and acute kidney failure, and is not fit for international travel.
"Whatever the Germans decide to do, we will continue to fight for justice in this sad case as there has never been any credible evidence of his personal involvement in even one murder, let alone thousands,'' Demjanjuk Jr said.
"He has never hurt anyone before, during or after the war. He is a good person as his family, grandchildren, friends and neighbours have always maintained."
'Ivan the Terrible'
Demjanjuk migrated to the US in 1952. In 1986, he was extradited from the US to Israel and sentenced to death for war crimes in 1988, after being identified by former inmates from the Treblinka death camp as "Ivan the Terrible" - a prison guard at the camp.
But the Israeli supreme court overturned his conviction, and he was released in August 1993 when new evidence emerged suggesting he was not the guard.
Statements by former guards assembled by the Soviet KGB identified another man, Ivan Marchenko, as being "Ivan the Terrible".
He then returned to Cleveland, Ohio, but new evidence emerged that Demjanjuk had worked as a guard at several Nazi death camps.
His US citizenship was revoked in April 2004 on the grounds that he lied on his immigration application about working for the Nazis.
He has lived under near house arrest since his return and has faced other investigations in the US.
Last year, the retired Ohio car worker lost his legal battle to remain in the US, when the supreme court rejected his appeal against deportation.
He remained in the US, however, while authorities tried to decide where he should be sent.
Efraim Zuroff, director of the Simon Wiesenthal Centre in Jerusalem, said: "My reaction is one of great joy and satisfaction and a sense that we are hopefully on the way to seeing justice being achieved in this very difficult and complex case."