The 63-year-old politician was charged with corruption, illegal campaign financing and concealment of Libyan public money after two days of questioning, the source added.
The charges are the most serious yet against the right-winger, who failed in his comeback bid last year.
He has repeatedly denied any wrongdoing.
He was released from custody and returned home Wednesday after being questioned by anti-corruption investigators over claims he accepted millions from Gaddafi in cash-stuffed suitcases.
For the charges to be brought in France, the investigating magistrate must have “serious and corroborating evidence” that the crime took place.
Sarkozy is charged with “passive corruption” which is defined as “corruption initiated by the corrupted party”.
He has argued that the fact he pushed for NATO to intervene militarily against Gaddafi's regime in 2011 — an intervention that culminated with Gaddafi's ouster and killing — shows he was not in the Libyan strongman's pocket.
Sarkozy has denounced the lack of “physical evidence” against him.
“I stand accused without any physical evidence because of declarations made by Mr Gaddafi, his son, his nephew, his cousin, his spokesman, his former prime minister,” Sarkozy told judges in remarks published by the Figaro website, a day after he was charged.
“I've been living the hell of this slander since March 11, 2011” when Gaddafi first made the allegations, he added.