Fifa latest: Sepp Blatter to face criminal investigation
The Swiss attorney general's office said he was being investigated "on suspicion of criminal mismanagement as well as - alternatively - on suspicion of misappropriation".
Mr Blatter was being questioned, and his office was searched, it added.
Fifa said it was co-operating with the investigation.
Mr Blatter, 79, has run Fifa since 1998 and has always denied any wrongdoing.
The Swiss attorney general's office said the investigation surrounds a TV rights deal Mr Blatter signed with former Caribbean football chief Jack Warner in 2005.
Mr Blatter is also suspected of making a "disloyal payment" of two million Swiss francs ($2m; £1.3m) in 2011 to UEFA president Michel Platini, the statement said. Mr Platini is widely expected to replace Mr Blatter when he steps down in February.
In May, seven Fifa officials were arrested in Zurich on corruption charges by US authorities.
Mr Blatter won a fifth consecutive Fifa presidential election on 29 May but, following claims of corruption, announced his decision to step down on 2 June.
He is due to leave the role at a Fifa extraordinary congress on 26 February.
Fifa cancelled its news conference on Friday only minutes before it was due to start.
Mr Blatter would have been speaking in public for the first time since general secretary Jerome Valcke was suspended last week amid allegations regarding ticket sales at the 2014 World Cup.
Newspaper reports implicated Mr Valcke, 54, in a scheme to sell tickets for above face value.
Mr Valcke, who describes the allegations as "fabricated", has been released from his duties pending an investigation.