The 19-count indictment alleges that Blagojevich and his aides discussed the possibility that he could land a Cabinet post in President Obama's administration, fundraising help or a high-paying job in exchange for an appointment to the president's vacant Senate seat.
A federal grand jury indicted Blagojevich, 52, on 16 felony counts, including racketeering conspiracy, wire fraud, extortion conspiracy, attempted extortion and making false statements to federal agents, Reuters reported.
In a statement, Blagojevich reasserted his innocence and vowed to fight in court to clear his name.
He asked residents of Illinois to wait for his trial and afford him "the presumption of innocence that they would give to all their friends and neighbors."
Blabojevich also stands accused of trying to extort an Illinois congressman for fundraising assistance by withholding a $2 million state grant to a public school in the congressman's district and lying when FBI agents came to question him, according to the Chicago Tribune and the Associated Press.
President Obama's Deputy Press Secretary, Josh Earnest, said the White House would not comment.
The indictment charges that the former governor was involved in a corrupt scheme to get a massive kickback in exchange for refinancing billions of dollars in Illinois state pension funds. It said he took part in a plan with convicted political operative Antoin "Tony" Rezko and two others to make money while Blagojevich was governor, then split the profits after he left the office, according to the AP.
Blagojevich, a Democrat who has said repeatedly that he did nothing wrong, has promised to fight the charges in court. He also has a book deal lined up to help tell his side of the story.
The second-term governor was arrested Dec. 9, and U.S. Attorney Patrick J. Fitzgerald had faced a Tuesday deadline to supplant a criminal complaint with an indictment. The allegations that Blagojevich sought to profit from the filling of Mr. Obama's Senate seat and the ensuing drama over whether he would be removed from office raised a national political stir.
The Illinois House impeached him on Jan. 9, and the Senate convicted him and removed him from office Jan. 29.
If convicted, Blagojevich faces more than 300 years in prison and at least $4 million in fines, plus restitution, according to the indictment.
The indictment also charges the former governor's brother, Robert Blagojevich, one-time chief fundraiser Christopher Kelly, former aide Lon Monk, Springfield lobbyist-millionaire William Cellini and former chief of staff John Harris, who has agreed to cooperate in the case, according to prosecutors.
Blagojevich's administration was under federal investigation for years. Kelly and Rezko already have been convicted of federal crimes and are facing prison.
The former governor's wife, Patti, was mentioned repeatedly in the criminal complaint, but she was not charged in the indictment.
The governor was caught on court-approved wiretaps describing the Senate seat as something so valuable "you just don't give it away for nothing," adding that he might appoint himself if he could not get anything for the seat.
The charges on the indictment predate his election as governor. Prosecutors accuse Blagojevich of trying to profit with a circle of friends, who would then divide the spoils after he left office.
The federal government wants Blagojevich to forfeit $188,370 and might try to seize his home if needed.
"We're saddened but not surprised by the indictment" Blagojevich lawyer Sheldon Sorosky told the Tribune. "Gov. Blagojevich is innocent and will fight this in court."
Blagojevich has been free on bond since a brief court appearance in December.