Ms Netanyahu has been variously accused of using money set aside for the prime minister’s official residence for furniture and improvements to the pair’s private home, hiring Likud Party central committee member Avi Fahima as an electrician against official advice, paying for her elderly father’s care, inflating dinner party numbers to hire private chefs, and pocketing 23,000 shekels (£4,800) in recycling refunds.
She denies any wrongdoing.
Earlier this week Ms Netanyahu took a polygraph test ahead of the expected indictment on her “own initiative” in order to “prove her version of events” before the attorney general made his decision, which was widely expected on Friday.
The lie detector found she answered truthfully questions related to the alleged misuse of funds – including replying “no” to the question “Were you aware in real time of the breaking of rules regarding the ordering of food and other items for the prime minister’s residence?”
Polygraph test results are not admissible as evidence under Israeli law, but can be submitted as an “indication of events”.
Mr Mandelbilt's office accepted the police's recommendation that Ms Netanyahu be indicted after two years of investigations triggered by a state comptroller report into excessive spending at the residence - and a lengthy final interrogation by Israel’s national fraud squad last month.
In a post on his Facebook page on Friday Benjamin Netanyahu came to his wife's defence, calling the claims "absurd and baseless".
"Sara Netanyahu is a brave and honest woman and has never done anything wrong... The sharp increase in spending at the prime minister's residence was caused by offences committed by the problematic chief caretaker, Meni Naftali, a criminal state's witness and a serial liar. The average monthly spending on ordered meals while [he worked there] was five times the monthly average during the four years that followed, when Naftali did not work there. That says it all.
"Naftali is making false accusations against the prime minister's wife to extricate himself from accountability for the offences he committed.
"Not only did the prime minister's wife not commit any offence," Mr Netanyahu added, "the very focus on the meals of Prime Minister Netanyahu, who works around the clock for the country and its security, as well as the focus on his family's meals, is pathetic and obsessive."
Mr Naftali has denied the Netanyahus' claims.
The charges against Sara Netanyahu are the first to be formally brought in several investigations into the prime minister and his inner circle.
Mr Netanyahu himself is currently under investigation in four different cases related to bribery, fraud and breach of trust.
It is alleged that he received lavish and “inappropriate” gifts from wealthy supporters, such as cigars and champagne, and offered commercial favours to Yedioth Ahronoth newspaper owner Arnon Mozes in return for positive coverage.
He has also been asked to testify in the corruption case against his personal lawyer, David Shimron, over defence contract deals with German shipmaker ThyssenKrupp to buy submarines for the Israeli navy, and has been accused of failing to disclose his ties to key actors in a merger deal involving state telecommunications company Bezeq.
Mr Netanyahu’s former chief of staff, Ari Harow, agreed to testify against his former employer last month, despite the fact he is a long time friend and loyal supporter of both Mr Netanyahu and his Likud party.
The move has widely been seen as a turning point in the investigations against the prime minister.
Like his wife, Mr Netanyahu denies all allegations of wrongdoing.
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