Ferrand has rebuffed calls to resign over allegations of favouritism towards his common-law wife in a lucrative deal with a health insurance fund.
The announcement by prosecutors in western France adds to the pressure on Richard Ferrand, who has rebuffed calls to resign over allegations of favouritism towards his common-law wife in a lucrative deal with a health insurance fund.
The affair has embarrassed 39-year-old Macron, who swept to power on May 7 on a pledge to rejuvenate France's corruption-plagued political class -- a win he aims to cement in June's parliamentary elections.
It comes as Justice Minister Francois Bayrou prepares to set out the contents of the president's first highly-anticipated bill, which will tighten ethical standards for holders of public office.
Ferrand, one of Macron's first prominent backers and formerly secretary general of the president's Republique En Marche (Republic on the Move) party, has denied any wrongdoing.
He told France Inter radio on Wednesday: "I am an honest man."
"Everything I have done in my professional life is legal, public and transparent," he insisted.
The Canard Enchaine investigative newspaper reported last week that an insurance fund that Ferrand headed in his native Brittany -- where he is an MP -- agreed in 2011 to rent a building from his partner Sandrine Doucen and carry out renovations that boosted its value.
Ferrand, a 54-year-old minister for territorial cohesion who is running for re-election to parliament, says Doucen made the fund the best offer and that he had no say in the matter.
Prosecutors initially waved away the allegations, saying there were no grounds for an investigation but on Thursday said they changed their minds in light of "extra elements that could implicate" Ferrand following a complaint from anti-corruption association Anticor.
Prosecutor Eric Mathais said the investigation would focus on whether the deal between Doucen and Les Mutuelles de Bretagne breached laws on probity in office and the workings of a public insurance fund.
Prime Minister Edouard Philippe said Tuesday he would not ask Ferrand to step aside unless he was formally charged with an offence.
On Thursday, Philippe held that line, with his aides saying the launch of an investigation had "not changed the rules"
The Ferrand affair, as it has been dubbed, is the lone snag in an otherwise smooth start to Macron's tenure, during which he has been praised for standing up to US President Donald Trump and taking a firm line with Russian leader Vladimir Putin on human rights.
Macron's rivals on the left and right have seized on the controversy to try win back ground lost to the centrist ahead of the June 11-18 parliamentary vote.
A Kantar Sofres poll on Tuesday showed Macron's fledgling party on course to win the first round of the election with 31 percent.
The conservative Republicans party, still smarting from the defeat of its corruption-accused candidate Francois Fillon in the presidential election, has accused Macron of ethical double-standards -- as has Marine Le Pen's far-right National Front (FN) and the Socialist Party.
Le Pen, who was runner-up to Macron in the presidential vote, said the Ferrand affair "looks terribly like the Fillon affair".
Beyond the allegations about the property deal Ferrand has also been left red-faced by revelations that he hired his son as his parliamentary assistant for four months in 2014.
The total sum involved -- 7,045 euros -- is a fraction of the money earned by Fillon's wife for a similar job over which Fillon is charged with misuse of public funds, but employing his son contradicts Ferrand's loud complaints about nepotism.
"Do what I say, not what I do," the left-wing Liberation daily wrote in a biting front-page headline Wednesday, alongside a picture of Ferrand. It added in an editorial: "When you preach morals in public life, this is a messy affair."