The National Anti-Corruption Commission voted unanimously to indict 46-year-old Yingluck on charges of dereliction of duty in overseeing the controversial rice subsidy programme.
Under the rice subsidy scheme, for which Yingluck was indicted today, the government bought rice from Thai farmers at a much higher price than on the global market.
However, it resulted in the accumulation of huge stockpiles of rice and hit Thailand's rice exports hard.
Yingluck was accused of negligence linked to the rice scheme with her political foes alleging the scheme drained Thai finances, damaged the country's rice producing industry and fostered massive corruption.
"The commission considers there is enough evidence to indict (Yingluck) and refers (the case) to the Senate," Panthep Klanarongran, chief of the National Anti-Corruption Commission (NACC) told reporters.
The case will now be voted on at the Senate. If impeached, Yingluck will be barred from politics for five years.
"The NACC had submitted letters to warn the defendant twice that the project would create problems and incur great losses, as well as allow corruption to take place throughout every step of the scheme," Commissioner Vicha Mahakun told reporters.
"Yet the defendant did not consider suspending the project as soon as she learned about the country's great losses from running the project," Mahakun said.
The NACC is also considering whether to file criminal charges against Yingluck.
The Constitutional Court ousted Yingluck and nine cabinet members yesterday after finding her guilty of abuse of power for the benefit of her powerful family in transferring then National Security Council chief Thawil Pliensri in 2011.
Both the rulings are a huge blow to the pro-government "Red Shirt" movement.
However, the anti-government People's Democratic Reform Committee (PDRC) welcomed the developments with protesters who were demanding Yingluck's resignation organising a march through the main Sukhumvit road today.
Yingluck's attempt through an amnesty bill to engineer a pardon for Thaksin, who was sentenced to prison, sparked a series of mass protests in Bangkok led by PDRC.
About 25 people have been killed and hundreds others wounded in political violence in six months of protests.