The charges come just three months after Muhyiddin lost a closely fought and divisive general election to Anwar Ibrahim and are likely to increase political tensions in Malaysia.
Muhyuddin, who led the country for 17 months between 2020 and 2021, becomes the second Malaysian leader to be charged with crimes after losing power.
At a Kuala Lumpur sessions court on Friday, the prosecution alleged Muhyiddin abused his position as prime minister to receive bribes of 232.5 million ringgit ($A78.10 million) in a bank account belonging to his party, Bersatu.
The former premier and opposition leader was charged with four counts of abuse of power and two counts of money laundering.
Muhyiddin pleaded not guilty to all six charges and has previously said the charges were "political persecution" of the opposition.
The former premier faces up to 20 years in jail if found guilty.
He will also be subject to a heavy financial penalty.
Muhyiddin was granted bail by the judge and ordered to surrender his passport.
The case will be heard next on May 26.
Muhyiddin and his party have faced graft investigations since losing the national election in November, with the party's bank accounts frozen by the anti-graft body and two leaders charged with bribery.
The former premier has also been banned from leaving the country.
Prime Minister Anwar has dismissed accusations that the charges against Muhyiddin are politically motivated, saying he has not interfered in investigations.
The allegations against Muhyiddin come ahead of crucial regional elections to be held in six states by mid-year, with his coalition expected to pose a strong challenge to Anwar's alliance.
Muhyiddin's alliance is a conservative ethnic-Malay, Muslim alliance that has portrayed itself to be clean of corruption, and won support from the country's majority Malays in last year's general election.
Anwar's progressive, multi-ethnic coalition has faced some criticism for joining hands with the corruption-plagued United Malays National Organisation (UMNO) party to form a government.
Both leaders failed to win a simple majority in last year's election but Muhyiddin's coalition made huge gains in Malay heartlands.
UMNO's former leader and ex-prime minister, Najib Razak, is serving a jail term for graft related to the multi-billion dollar corruption scandal at state fund 1MDB.
Anwar's deputy and current UMNO leader, Ahmad Zahid Hamidi, also faces graft charges.
The upcoming state polls are seen as a proxy vote on the Anwar government's performance so far.
