Jose Padilla has been charged with belonging to a North American terrorist support cell and with conspiracy to murder US nationals and providing material support to terrorists.
The charges are part of an 11-count indictment, which stems from an existing case in Florida, where Padilla once lived.
Along with four others, Padilla was charged with "conspiracy to murder, kidnap and maim persons in a foreign country ... for the purpose of opposing existing governments and civilian factions and establishing Islamic states under Sharia (Islamic law), and material support for terrorism," according to the indictment.
Announcing the charges at a news conference, US Attorney General Alberto Gonzales said Padilla, 34, will be transferred from military custody to the Justice Department.
"Mr. Padilla is now a new co-defendant -- along with Canadian national Kassem Daher -- in a criminal prosecution that previously charged defendants Adham Hassoun, Mohomed Youssef and Kifah Jayyousi with terrorism-related crimes," Mr Gonzales said.
"All of these defendants are alleged members of a violent terrorist support cell that operated in the United States and Canada," he said.
A federal grand jury in Miami, Florida, handed up the indictment on Thursday, and a trial is scheduled for September, Mr Gonzales said.
If convicted the one-time gang member and convert to Islam could face life in prison.
Dirty Bomb
Labelled an "enemy combatant" by the Bush administration, Padilla previously was accused of -- but has not been charged with -- plotting to detonate a radioactive "dirty bomb" in the United States and to blow up apartment buildings using natural gas lines.
The charges announced do not include conspiracy to commit terrorist acts in the United States.
After Mr Gonzales' announcement, Padilla's lead attorney said she welcomed the indictment.
"Now we can go to court and challenge the government's assertion," Donna Newman said.
She said Padilla is aware of the charges and "looks forward to being vindicated when we go to trial."
The defence has, however, expressed concerns that the government's previous accusations about Padilla’s alleged involvement in domestic bombing plots would "taint" him in the public eye.
Mrs Newman said the charges did not involve the alleged plots because the government "could not support those allegations."
Another Padilla attorney, Andy Patel, said he was not surprised at the indictment or the timing, with a petition pending before the US Supreme Court over the constitutionality of the way "enemy combatants" have been handled by the Bush administration.
"The issue before the Supreme Court is still alive and active -- that the president signed an order to hold an American citizen for three years without criminal charges," Mr Patel said.
"The fact that they now decided to charge Mr Padilla with a criminal offence doesn't mean they couldn't do this again to another person in the future.
"The Supreme Court will make the decision about whether or not they want to take this case."
Mr Patel has already argued before a federal appeals court in Richmond, Virginia, that the government ought to charge Padilla or release him.
"The fact that the government filed criminal charges is a vindication not just for Mr. Padilla but for the whole constitutional process," he said.
Padilla's attorneys filed their latest appeal to the high court on October 25, and the government had until next Monday to respond.
This indictment likely will make that pending Supreme Court appeal moot.
On the eve of a court proceeding to challenge Padilla’s original arrest warrant, President Bush designated him such a "grave threat" to national security that he was labelled an "enemy combatant" and handed over to the military.