The Conservative candidate for South Thanet has been charged with allegedly overspending in the 2015 General Election campaign.
Craig Mackinlay, who is running again on 8 June, stands accused under the Representation of the People Act 1983, alongside his election agent Nathan Gray and party activist Marion Little.
He said he had done nothing wrong and questioned the timing of the decision.
Other Tory candidates were investigated but no charges were brought.
Prime Minister Theresa May said: "The Conservative Party continues to believe that these allegations are unfounded.
"Craig Mackinlay is innocent until proven guilty and he remains our candidate."
If found guilty, Mr Mackinlay could face a maximum sentence of one year in prison, BBC Home Affairs correspondent Danny Shaw said.
Police forces have been investigating whether MPs' agents should have filed costs for battle bus visits to constituencies under local expenses.
The Conservative Party said they had been campaigning "across the country for the return of a Conservative government" and, as a result, associated costs were regarded as national and not local expenditure.
It added that election laws were confused and unclear and the party was committed to strengthening future electoral laws.
Mr Mackinlay, who is 50, his agent Nathan Gray, 28, and Marion Little, a party activist, 62, have each been charged with offences under the Representation of the People Act 1983 and are due to appear at Westminster Magistrates' Court on 4 July 2017.
In May the CPS announced that no criminal charges would be brought against more than 20 Conservative MPs in connection with the national party's failure to declare expenses for its battle bus campaigns.
Investigations were launched after a Channel 4 investigation into election spending.
Complex rules require parties to disclose national spending separately from the funds used to promote candidates, and separate national and local spending limits apply.
A statement on Mr Mackinlay's Facebook page said: "My candidature in South Thanet is entirely unaffected and my campaign continues as before."
"I have done nothing wrong and acted honestly and properly whilst a candidate in 2015, as all candidates do, [and] acted upon advice throughout."
Mr Mackinlay said it was a "shocking decision" by the CPS.
He said: "I am very disappointed with the way this has been handled by the CPS and Kent Police and I must question the timing of this decision given that Kent Police confirmed on 18 April that their file had been sent to the CPS to review and make their decision: Why leave this until a few days before the election?"
Analysis: Helen Catt, BBC South East Today Political Editor
It may feel like a curve ball this close to polling day, but in electoral terms the decision to charge Craig Mackinlay means no change.
Postal ballots have already been sent out, the deadline for withdrawing nominations has passed, so there is no choice for the Conservatives to make, even if they wanted to: Craig Mackinlay will be the party's candidate on the ballot paper in South Thanet.
If he were to win, he would also be able to take his seat like any other MP; being charged with a criminal offence does not preclude that.
The Conservative Party could always decide to withdraw the whip, leaving him as an Independent, but that is unlikely in this case.
Nick Vamos, CPS head of special crime, said Kent Police had handed a file of evidence to it on 18 April and the CPS had asked for further investigation "in advance of the 11 June statutory time limit by when any charges needed to be authorised".
He added: "We have concluded there is sufficient evidence and it is in the public interest to authorise charges against three people."
The 2015 election saw Mr Mackinlay elected as MP for South Thanet beating Nigel Farage, then UKIP leader, into second place.
Commenting on the CPS decision, Mr Farage said he was pleased someone had been charged and he predicted the Conservative vote in South Thanet would collapse.
He said: "I think that constituency will now be a straight fight between UKIP and the Labour Party."
Mr Farage also said: "Once again, it is bad judgement from Theresa May.
"Why on earth would you allow someone to go ahead as General Election candidate when this cloud was clearly hanging over him?"
Labour leader Jeremy Corbyn said the Tories' decision to comment on the case could be seen as "interference" in an independent process.
He said: "Nobody should be commenting on the details of an ongoing case, the police must be allowed to act independently, to investigate on the basis of any evidence they've got and the Crown Prosecution Service must be allowed to make its decision on whether to proceed on a case.
"I think it is a very bad road when democratically elected politicians start offering a running commentary on independent judicial processes. We have to have total separation of political and judicial powers in this country."