French presidential candidate Francois Fillon has been placed under formal investigation over an alleged diversion of public funds, prosecutors say.
The centre-right contender is suspected of paying hundreds of thousands of euros to his family for work they may not have done.
He denies wrongdoing, but had earlier said he would quit the presidential race if placed under investigation.
Until recently, he was the favourite to win the elections in April and May.
But the former prime minister has now slipped behind far-right National Front leader Marine Le Pen and centrist Emmanuel Macron.
On Tuesday, Mr Fillon, 63, was personally placed under formal investigation over suspicions that he arranged for his wife Penelope to be paid public money for work as his parliamentary assistant which she did not actually carry out.
He is also being investigated over payments to his two children Marie and Charles when he was a senator. Mr Fillon has said his children were paid as lawyers, for specific tasks. But neither was a qualified lawyer at the time.
In all, Mr Fillon is suspected of diverting public funds, complicity in misappropriating funds, receiving the funds and not declaring assets fully.
A magistrate had already been investigating the case, but until now the inquiry did not mention directly Mr Fillon.
This is the moment that Francois Fillon feared, but which he knew was probably coming, the BBC’s Hugh Schofield in Paris reports.
The embarrassment is acute because this is the same Mr Fillon who before the campaign said it would be inconceivable for someone to remain as a candidate if placed in this legal situation, our correspondent adds.
Who could imagine General de Gaulle under judicial investigation, Mr Fillon said in a speech which is now coming back to haunt him.
In a separate development on Tuesday, French media report that Marie Le Pen is now suspected by the country’s tax authorities of undervaluing her share of two properties jointly owned with her father Jean Marie Le Pen.
She has made no public comment on the issue.
Earlier this month, the European Parliament lifted Ms Le Pen’s immunity from prosecution after she tweeted pictures of so-called Islamic State violence.
She has described the move as “part of the system that wants to stop the French people’s candidate that I am”.
A separate investigation is continuing into whether she misused European Parliament funds.
Ms Le Pen has refused to attend a police interview over the latter allegations. She denies wrongdoing and claims that they are a plot to derail her campaign.