Najib was granted bail set at 1 million ringgit ($247,000). Whipping is also a penalty but Najib would be exempt because he is over 60 years old. Najib will turn 65 later this month.
As prime minister, Najib sacked Malaysia's attorney general and anti-investigation commission chief when they attempted to investigation the scandal. "I have not had a chance to defend myself".
Johor Bahru division chief Shahrir Samad also weighed in on Mr Najib's arrest.
Najib's lawyer Muhammad Shafee insisted his client was "not a flight risk".
On May 22 and 24, the former prime minister was summoned to the MACC headquarters to have his statement recorded over the issue. His arrest was in relation to a probe into SRC International, a former unit of the troubled 1MDB.
Each of the three charges has a maximum penalty of 20 years in prison. The new government has reopened investigations into 1MDB that were stifled under Najib's rule. He looked grim and his jaw was drawn tight.
He is due to appear in court on Wednesday morning and sources told Reuters he faces several charges.
Malaysia's anti-graft agency confirmed the arrest, according to Malaysian state news agency Bernama.
While a few of Najib's children have come to provide support, his brothers and wife were noticeably absent from the hearing today. Some were heard chanting "God save Najib!"
Some members of Najib's UMNO party chanted and held up placards in support of their former leader.
Najib did not enter a plea at the lower sessions court, however, because the case is being transferred to the High Court, an AFP reporter said. He said that he has returned the money.
The allegations of massive corruption were a major factor behind the shock election loss by Najib's long-ruling coalition to a reformist alliance headed by his former mentor, Mahathir Mohamad.
Najib will contest the charges and clear his name in court, it added. Police and anti-graft agency officials have revived investigations into the fund's missing billions since his ouster.
Last week, Malaysian police announced they had seized almost $275 million in cash, jewelry and luxury handbags in raids on properties linked to Najib. "Wait for our statement", the source said. "His family has got some means, so it has nothing to do with 1MDB if it comes from Kazakhstan".