Muluzi, who was released on bail after being questioned Thursday, faces 42 counts of theft, corruption and breach of trust, said Anti-Corruption Bureau Director Gustave Kaliwo.
Muluzi's lawyer, Fahad Assani, said the ex-leader denies the charges.
"We are very confident he will be found very, very innocent," Assani said.
One of the indictments against Muluzi concerns $10 million in development funds from Taiwan, Morocco, Libya and Rwanda that found its way into his account, Kaliwo said. A second indictment deals with $50,000 the government allegedly channeled through the Tanzanian Embassy to Muluzi.
Sam Mpasu, spokesman for Muluzi's United Democratic Front party, called the arrest a continuation of the "political persecution" waged by the administration of Muluzi's hand-picked successor, Bingu wa Mutharika.
Wa Mutharika quit the party that put him in power last year, accusing his former allies of blocking his clampdown on corruption, and survived a subsequent attempt to impeach him. Several former government officials are either being investigated or are on trial for fraud and corruption.
Muluzi led the impoverished southern African nation from 1994-2004.