Protesters chanted slogans as Mr Katsav arrived at court
Moshe Katsav has called off a plea bargain that would have seen him plead guilty to sexual misconduct but avoid more serious charges.
The former president of Israel, who was forced to step down from his post last year, appeared in court in Jerusalem to say he wanted to prove his innocence.
Prosecutors will now have to decide whether to prepare a new indictment.
Four female former employees accused him of a series of sex offences, including rape.
The proposed plea bargain Mr Katsav, 62, agreed with Israel's attorney general angered women's rights groups, but was upheld by the Supreme Court in February.
Under the terms of the agreement, prosecutors agreed not to seek a jail term if he admitted to sexual harassment and indecent acts.
Outside the court, a crowd of women's activists waved placards denouncing sexual violence and chanted "rapist!" as Mr Katsav made his way inside, news agency AFP reported.
The hearing had been expected to approve the plea bargain.
July 2000: Elected president of Israel
January 2007: Charged with rape and sexual harassment
28 June 2007: Strikes plea bargain to avoid rape charges and a prison term
29 June 2007: Resigns as part of plea bargain
July 2007: Supreme Court allows challenge to plea bargain
Feb 2008: Supreme Court upholds plea bargain
But once inside, Mr Katsav said he had reconsidered his decision.
"I have decided to fight for my innocence," he told the court.
Mr Katsav has accused the Israeli media of mounting a politically motivated witch-hunt against him.
He may now become Israel's first former head of state to stand trial.
One of his lawyers, Avigdor Feldman, said the ex-president changed his mind after he was convinced by his legal team that the prosecution did not have enough evidence to convict him, reported Associated Press.
"We believe that Moshe Katsav, based on the evidence, is innocent, even under this minor indictment that was the basis for the plea bargain," he said.
"He told me time and time again: 'I am innocent. Why do I have to admit to a plea bargain that includes crimes I did not commit?'"
Originally, the police charged Mr Katsav with rape, sexual harassment and abuse of power.
Part of the controversial deal was for him to step down as president of Israel, a largely ceremonial role.
He was also supposed to pay damages to his accusers.
Rape convictions in Israel carry a maximum sentence of 16 years in prison.