Mr Najib suffered a shock election loss in May, as Malaysia's ruling coalition was ousted after governing the country since independence in 1957.
Najib has consistently denied wrongdoing in dealings with 1MDB.
A day before his arrest, Malaysia's former prime minister Najib Razak swore that $680 million found in his personal bank account was a donation from a Saudi prince.
He said the gag order was to preserve the "integrity" of the criminal cases from public comments against Najib before the trial began. The charge, which carries a maximum sentence of 20 years imprisonment and a fine of up to five times the value of amount received, is one of three charges laid in Kuala Lumpur on Wednesday.
"I am confident of my innocence, I believe in my innocence and this is the best chance to clear my name", Najib told reporters outside the courtroom after being released on bail.
"It shows the resolve of the new government to address previous abuses of power".
Earlier today, Attorney General (AG) Tommy Thomas was coy about whether more charges would be preferred against Najib.More news: 28-year-old socialist upsets 10-term Congressman in NY Democratic primary
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United States investigators say US$4.5 billion was stolen and laundered from 1MDB by Najib's associates, including some US$700 million that landed in Najib's bank account.
Some of Najib's children were present in the court room, including his stepson Riza Aziz who on Tuesday was questioned by anti- graft officers in connection with their 1MDB probe.
Last week, Amar Singh, Malaysia police's head of commercial crime, said raids on six properties linked to Razak had led to the seizure of 12,000 pieces of jewellery valued at 880m ringgit (£165m).
- Najib unexpectedly loses election to Dr Mahathir, who immediately reopens probe into 1MDB.
The U.S. Department of Justice has said more than $4.5 billion was siphoned from the fund.
In 2015, it emerged that $4bn had gone missing from the 1MBD sovereign wealth fund, and almost $700m was allegedly transferred into Najib's bank account. Red Granite agreed in March to pay the US government $60 million to settle claims it benefited from the 1MDB scandal.
Authorities have also frozen 408 bank accounts allegedly involved in the "misappropriation and misuse" of $271 million linked to 1MDB.