The prime minister, who himself is embroiled in a series of corruption investigations, has called the allegations against his wife absurd and unfounded. Sara Netanyahu appeared before the Jerusalem Magistrates Court on Sunday.
Mrs Netanyahu denies any wrongdoing.
Sara Netanyahu has been charged with allegedly overspending roughly $100,000 (£76,220) on celebrity chefs at the prime minister's official residence, even though there was a full-time chef on staff. She was not asked at the hearing to enter a plea.
While the maximum penalty for break of trust and fraud is three and five years, respectively, prosecutors believe that Mrs. Netanyahu would only receive community service if convicted, according to Haaretz.
According to the indictment, Mrs Netanyahu actively sought "to circumvent the rules and conditions" surrounding the logistics of the Prime Minister's official residence "in order to fraudulently obtain state funding for various expenses for the accused and her family that were not supposed to be financed in this manner". In 2016, a court ruled she abused a housekeeper and awarded the man $42,000 (£32,000) in damages.
Accused: Sara Netanyahu arrives for her fraud trial in Jerusalem.
The right-wing prime minister has held the job for a total of more than 12 years, first from 1996 to 1999 and again beginning in 2009. The state is also authorized to foot the bill for private guests of the prime minister and his or her spouse so long as this is not a social or family event involving more than 20 people.
Mr Netanyahu, Israel's political kingpin on track to become the country's longest-serving prime minister, has accrued a long list of detractors during his decades as a political operative from Israel to Washington.
Netanyahu is also suspected of similar offenses in "Case 2000", in which the police claim that the owner of "Yedioth Ahronoth" newspaper, Arnon Mozes, promised him positive coverage in return for restrictions imposed on the "Israel Hayom" rival newspaper.
Police have recommended Benjamin Netanyahu be indicted in two cases, though the attorney general has yet to decide whether to do so.