IMF chief Christine Lagarde is to stand trial in France for alleged negligence over a €400m (£291m; $434m) payment to a businessman in 2008.
She was finance minister in President Nicolas Sarkozy's government at the time of the compensation award to Bernard Tapie for the sale of a firm.
Tapie supported Sarkozy in the 2007 presidential election.
Lagarde's lawyer described the court's decision as "incomprehensible", and said the IMF boss would appeal.
Tapie was once a majority shareholder in sports goods company Adidas but sold it in 1993 in order to become a cabinet minister in Francois Mitterrand's Socialist government.
He sued the Credit Lyonnais bank over its handling of the sale, alleging that the partly state-owned bank had defrauded him by deliberately undervaluing the company.
His case was later referred by Lagarde to a three-member arbitration panel which awarded the compensation.
Investigators suspect he was granted a deal in return for his support of Nicolas Sarkozy.
France's Court of Justice of the Republic (CJR) decided that Lagarde should be tried on the charge of "negligence by a person in position of public authority" over the compensation case, iTele TV channel and the Mediapart website reported on Thursday.
A court spokesman later confirmed the decision.
The media said the CJR investigation magistrates declined to follow the recommendation of another court which last year decided not to pursue the case.
"It's incomprehensible," Lagarde's lawyer Yves Repiquet told iTele. "I will recommend Lagarde appeal against this decision."
Lagarde, 59, replaced Dominique Strauss-Kahn as IMF managing director in 2011.
Strauss-Kahn - also a former French minister - resigned following his arrest in New York on charges of sexual assault that were later dropped.