Two other charges allege that Najib committed "criminal breach of trust" in dealing with a further $5 million. These charges relate to his actions in five days over Christmas in 2014, and the months of February and March, 2015 respectively.

Each carries a punishment of between two and 20 years in jail, "with whipping" and a potential fine.

All three charges relate to a 4 billion ringgit ($1.34 billion) entity called SRC International, which was a subsidiary of the notorious Malaysian sovereign wealth fund, 1MDB.

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Najib, 64, was arrested at his home on Tuesday afternoon, less than two months after police and graft busters revived probes into the fund's missing billions and a suspicious transaction involving SRC International, a former 1MDB unit.

Najib, who spent the night in lock-up, arrived at 8.20am local time at the court complex in Malaysia's capital of Kuala Lumpur, wearing a dark blue suit and a red tie. Crowds of media and curious onlookers jostled to catch a glance of the former premier as he was led to a sessions court where he was read the charges.

Some members of Najib's UMNO party chanted and held up placards in solidarity with the former premier.

Earlier, state news agency Bernama broadcast Najib's convoy live as it moved slowly through morning rush-hour traffic during the long drive from the Malaysian Anti-Corruption Commission's offices in the administrative capital Putrajaya to the court in Kuala Lumpur.

Media reports said Attorney-General Tommy Thomas would lead the prosecution against Najib.

That is only a fraction of the total amount allegedly misappropriated from 1MDB. The US Department of Justice has said over $US4.5 billion was siphoned from the fund.

SRC is the initial focus of the Malaysian investigators as all the suspicious transactions involving the firm were made through Malaysian entities, unlike other 1MDB related transactions that went through foreign banks and companies.

A spokesman for Najib said on Tuesday that the SRC charges and the 1MDB investigations against the former leader were "politically motivated", and that Najib will contest these charges and clear his name in court.

Mahathir said in an interview with Reuters last month that embezzlement and bribery with government money were among the charges that Malaysia was looking to bring against Najib, 64, adding that Najib was fully responsible for the 1MDB scandal.

Since his loss at the polls to mentor-turned-foe Mahathir, Najib has been barred from leaving the country and had millions of dollars of items seized from properties linked to his family.

In a pre-recorded message posted on Twitter after his arrest, Najib said not all the accusations against him and his family were true.

"Let investigations be carried out. I have not had a chance to defend myself," he said.

With Reuters