A Lithuanian parliamentary commission has concluded that there are six legitimate grounds on which to impeach the president, Rolandas Paksas.
The presidential scandal may undermine Lithuania's credibility
Parliament voted in December to start impeachment proceedings against the embattled president, after a report concluded he was a threat to national security.
A parliamentary commission set up to study the issue further concluded that all six counts against him were valid - including claims that he violated the constitution and his presidential oath.
A final vote on whether to dismiss the president is expected in April - just weeks before Lithuania joins the European Union.
Parliament voted on Thursday to accept the report, thus initiating impeachment proceedings against the president.
"The special commission has decided to agree to all six accusations (against Paksas)," said Julius Sabatauskas, deputy leader of the commission.
"They are supported by evidence and they are serious."
Much of the case against Mr Paksas hinges on ties with one of his backers, Russian businessman Yuri Borisov.
Official reports into the case have also brought to light other allegations of wrongdoing, including the leaking of confidential information.
The timing of the affair is seen as embarrassing for Lithuania, ahead of its 1 May accession to the EU.
Correspondents say the scandal surrounding Mr Paksas may also seriously undermine Lithuania's credibility in the fight against international crime - especially as it shares a long border with the Russian enclave of Kaliningrad.
Analysts fear criminal organisations may be seeking to use the country as a springboard for extending their activities to western Europe.