A criminal investigation has begun into Pyotr Pavlensky's actions at the Kremlin wall on Sunday, the interior ministry told news agencies in Moscow.
Pavlensky was arrested but released the following day and placed under travel restrictions.
However, the 29-year-old now faces the charge of hooliganism.
The hooliganism charge is used to prosecute perceived breaches of public order. It is the same charge used to jail members of the punk band Pussy Riot, and to prosecute activists from the Greenpeace ship Arctic Sunrise.
The St Petersburg performance artist had reportedly sat for an hour and a half on the square on Sunday afternoon, with a nail driven through his genitals into the ground. His "fixation" act, he said, was a metaphor for apathy in Russia.
Critics of Russian President Vladimir Putin accuse the veteran leader of presiding over a crackdown on dissent since his re-election in March last year.
A police source told Interfax news agency that the article under which Pavlensky was being charged carried a wide range of penalties. starting with a fine and going up to a five-year prison sentence.
His graphic act outside the Lenin Mausoleum was recorded on video which was put online.
Timing his act to coincide with Police Day, Pavlensky said in a statement published on Sunday: "When the authorities turn the country into one big prison, openly robbing the populace and channelling funds to increase and enrich the police and other security agencies, society accepts arbitrariness and, having forgotten its advantage in numbers, brings the triumph of the police state closer through its inaction."
Pavlensky previously attracted attention by sewing his lips together in July of last year and demonstrating outside St Petersburg's Kazan Cathedral in support of the imprisoned Pussy Riot protesters. In May of this year, he wrapped his naked body in a "cocoon" of barbed wire outside the city's parliament.
Fellow figures from the Russian arts world praised his Red Square act in comments on grani.ru, with one calling it a "powerful gesture of absolute despair" and another, "a manifesto of powerlessness".
A naked performance artist who nailed his scrotum to Red Square as a political protest may face up to five years in prison, Russian media report.