Olmert is the first former Israeli prime minister to be indicted. Shula Zaken, Olmert's personal secretary, was also charged.
The allegations, which Olmert denies, initially occurred during his premiership, and forced him to step down as leader of the Kadima party and prime minister.
Sherine Tadros, Al Jazeera's correspondent in Jerusalem, said: "Olmert's media advisor has been lashing out against both the state prosecutor and the attorney general saying that, however weak the evidence was against Olmert, there was no other choice but to indict him because they had forced him to quit the prime ministership earlier on this year.
"On the other hand they say when they go to court they will be free from this bias considerations and that's why they are sure that Olmert will be cleared."
He is said to have charged the government and charities for expenses previously paid for by different organisations, in turn building up credit at a travel agency which he then used for personal trips.
Morris Talansky, a US businessman, is also said to have given Olmert different amounts of cash adding up to as much as $150,000.
Olmert, 63, has said he did take the money, but said they were donations for his re-election campaigns for the post of mayor of Jerusalem and the party leadership.
Prosecutors also allege Olmert, while industry minister, established investment opportunities for a friend, Uri Messner.
The allegations relate to when Olmert was serving as the mayor of Jerusalem and afterwards when working as a cabinet minister before he became prime minister in 2006.
Gil Hoffman, the chief political correspondent for The Jerusalem Post newspaper, told Al Jazeera: "On the one hand, it is embarrassing that our politicians do such things, but on the other hand, it shows that this is a country where you can't get away with such things any more and I think that's something Israelis can be proud of."
Hoffman added that the charges would overshadow any other legacy Olmert might have had.
|Olmert was forced to resign his post as prime minister because of the allegations [AFP]
"[Olmert] made an effort to push the peace process [with the Palestinians] forward ... but ... his legacy will be this corruption."
It is the first time that Olmert has been officially charged despite several corruption investigations conducted into his affairs.
Mazuz is leaving office in four months' time and analysts have said that he wanted to begin proceedings before he vacates his post.
Olmert could spend up to 10 years in jail if found guilty.
He was replaced by Binyamin Netanyahu, the Likud leader, as prime minister after elections were held following Olmert's resignation.