Seventy-year-old Gyarfas, who was head of the MUSZ swimming federation for 23 years, was arrested over the allegations in April 2018 and had been under supervision ever since.
A statement from prosecutors said they had gathered enough evidence to charge him with "incitement to premeditated murder".
The charge relates to the killing of media magnate Janos Fenyo, who was murdered with a submachine gun in his car in Budapest on February 11, 1998.
Prosecutors say they believe the killing was ordered by Gyarfas after a "commercial dispute and power struggle" between the two men led to "an intense personal conflict".
Gyarfas has repeatedly denied the allegations.
In the indictment prosecutors say Gyarfas hired a contract killer to target Fenyo in September 1997, but the hitman failed to carry out the murder.
The investigation was reopened in 2017 and, according to Hungarian media reports, made use of taped conversations between Gyarfas and another underworld figure, Tamas Portik, who is suspected of organising the killing.
Gyarfas, a former sports journalist, took over at the head of MUSZ in 1993 but was forced to end his tenure in 2016 after facing mounting criticism by swimmers including Olympic champions Katinka Hosszu and Daniel Gyurta over his "undemocratic" handling of the sport.
The swimmers said that under Gyarfas, MUSZ had not followed through on promises made to athletes including payment of training subsidies and victory bonuses, as well as pledges to upgrade facilities.