Prosecutors in the Brittany town of Brest announced on Thursday morning they had opened a preliminary probe into Richard Ferrand, the minister accused of conflict of interest in a property deal.
Ferrand is the minister for territorial cohesion, but he is also seen as Macron's right hand man and has been leading the parliamentary elections campaign for the president's Republique en Marche party.
After initially suggesting they would not be investigating Ferrand French prosecutors in Brest say they will open a probe to gather together further elements to determine whether Ferrand has broken any laws.
On Wednesday French President Emmanuel Macron had backed Ferrand, urging the media "not to act as judge" in an embarrassing affair that has embroiled the new government, not least because the new president had vowed to clean up politics.
For days, France's new government has been swatting away allegations that Ferrand favoured his wife in a lucrative deal with a public health insurance fund when he headed the company.
The affair is the lone snag in an otherwise trouble-free 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.
Ferrand, a former Socialist lawmaker who joined Macron's camp last year and helped run his campaign, has denied any wrongdoing and rebuffed calls by rivals for his resignation.
"I am an honest man," the 54-year-old minister told France Inter radio on Wednesday.
The investigative Canard Enchaine 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 wife and carry out renovations that boosted its value.
Ferrand has dismissed the report as a "welcome present" from the media for the new government, saying that his wife made the fund the best offer and that he had no say in the matter.
The revelations are nonetheless an embarrassment for 39-year-old Macron, who campaigned on a promise to clean up and rejuvenate France's corruption-plagued political class.
His first piece of legislation -- to be unveiled next month -- will set new standards for ethics in public office.
Francois Baroin, who is leading the legislative campaign for the conservative Republicains party, criticised Macron for not taking "the necessary decisions" regarding Ferrand.
"I can believe the president's sincerity," Baroin said at a rally in the port city of Caen, but "I don't understand why he is not taking the necessary decisions, which are in his minister's interests."
Government spokesman Christophe Castaner acknowledged the "unease" generated by the revelations and said he was "favourable" to an inquiry, "if there are elements that lead the courts, or the police or the gendarmes to believe an inquiry is needed."
He insisted, however, that "from a legal point of view, nothing Richard Ferrand has done is objectionable."
Prime Minister Edouard Philippe has also backed Ferrand although he said he would be forced to resign if he was charged.