Sara Netanyahu, along with Ezra Saidoff, a former deputy director general of the Prime Minister's Office, have been indicted on fraud and breach of trust according to an official statement.
Investigators in the case claim, she knew she was breaking rules prohibiting the residence from ordering meals from outside during periods when the residence had a cook on its staff and concealed these facts.
Ezra Saidoff allegedly conspired to avoid the regulations and create a false impression that there was no cook at the residence in Jerusalem.
Commenting on these charges, Netanyahu's lawyer Yossi Cohen called them "ridiculous and bizarre".
The State Attorney's Office declined the proposal, claiming that returning funds supposedly gained illegally is not sufficient punishment for someone suspected of systematically defrauding the state.
Sara Netanyahu, for her part, refused to agree to pay the residence for the value of the meals and to admit to the accusations against her.
The prime minister, who himself is embroiled in corruption investigations, has named the accusations against his wife "absurd and unfounded."