The 88-year-old was charged with "complicity in misuse of corporate assets and concealment".
The 88-year-old was charged with "complicity in misuse of corporate assets and concealment" over the sale of submarines to Pakistan in 1994 when he was a premier and hoping to become president, the source confirmed to AFP.
The so-called Karachi Affair came to light during an investigation into a 2002 bombing in the Pakistani city which targeted a bus transporting French engineers working on the submarine deal.
Fifteen people were killed, including 11 of the engineers.
The Al-Qaeda extremist network was initially suspected of the attack but the focus later shifted to the arms deal, with investigators probing whether the bombing was revenge for the non-payment of bribes secretly promised to Pakistani officials.
Balladur, a conservative, was charged after being questioned Monday by the Court of Justice of the Republic, a special tribunal that hears cases of ministerial misconduct, the source said.
In a statement sent to AFP Balladur said he had instructed his lawyer to challenge the charges, saying they failed to take into account the fact that his campaign spending had been vetted by the authorities and that the alleged wrongdoing dated back 23 years.
The case is one of several high-profile corruption cases ensnaring senior politicians in France, chiefly from the conservative camp.
Right-wing presidential candidate Francois Fillon crashed out of the running in this year's election after being charged with giving his wife suspected fake jobs as a parliamentary assistant.
Former president Nicolas Sarkozy, who served as Balladur's budget minister, has also been embroiled in several scandals, including suspected corruption involving a judge.