French ex-President Chirac has been questioned for more than three hours over alleged embezzlement of public funds as Paris mayor, his lawyer says.
Mr Chirac has always denied wrongdoing
The case relates to a scheme whereby rightist sympathisers were allegedly given jobs by Paris city hall.
Last summer, Jacques Chirac was questioned by another judge over allegations in the same case.
He has consistently denied any wrongdoing while he was mayor of the capital between 1977 and 1995.
He lost immunity from investigation after he left the presidency in May.
Mr Chirac has now been placed under formal investigation, said his lawyer Jean Veil.
Mr Chirac's lawyer, Jean Veil, said his client was co-operating
This means judges believe there is enough evidence against a suspect to proceed with a more exhaustive investigation, which may or may not culminate in a trial.
It could be the first time in modern French history that a former president faces criminal charges.
Mr Veil said an interview conducted by a magistrate with his client on Wednesday morning had been conducted in "the best possible atmosphere", AFP news agency reported.
"I simply think that he is not necessarily unhappy with the fact that for the first time he had an opportunity to explain himself on this issue," Mr Veil said.
"He would certainly have spared himself this if it was possible, but in view of the heaviness of the judicial investigation, of the number of denunciations which have been made, it was quite certain that this would happen one day."
This investigation relates to allegations that during Mr Chirac's time as mayor of Paris, up to 40 people were paid salaries by the city authority despite having had no connection to it.
They are alleged to have been supporters of Mr Chirac's own conservative RPR political grouping.
The former French president has always denied wrongdoing. In an article in the French paper, Le Monde, on Wednesday Mr Chirac maintained that he had only ever hired "men and women of quality" to work for Paris.
Scores of people have been disgraced by the courts in party funding trials, including several of Mr Chirac's own close associates.
Mr Chirac was questioned by a magistrate in July over another funding scandal.