Deputy Defence Minister Anatoly Antonov said Turkey was the biggest buyer of "stolen" oil from Syria and Iraq.
Mr Erdogan said Russia had no right to "slander" Turkey with such claims.
Russia and Turkey have been locked in an angry dispute since Turkey shot down a Russian jet last month.
Russian President Vladimir Putin has already accused Ankara of downing the plane on its Syrian border to protect oil supply lines.
"According to available information, the highest level of the political leadership of the country, President Erdogan and his family, are involved in this criminal business," Mr Antonov told journalists in Moscow.
"The Turkish leadership has demonstrated extreme cynicism. Look at what they are doing!" he said.
"They have invaded the territory of another country and are brazenly plundering it."
The defence ministry cited satellite images that it said showed oil tankers travelling from IS-held territory to Turkey.
The trucks, it said, travelled to three locations - including refineries - in Turkey and some was then moved on to a third country.
Russia said it was producing only "part of the evidence" for now and did not provide direct proof of their claim that Mr Erdogan and family were involved.
US officials have previously said they have information suggesting Turkish "middlemen" were involved in the illegal IS oil trade.
The Turkish authorities have made commitments to tackle smuggling on their territory.
Despite the tensions, Russian Foreign Minister Sergei Lavrov has said he is prepared to meet Turkish counterpart Mevlut Cavusoglu at a conference in the Serbian capital Belgrade this week.
Mr Lavrov said he was willing to "hear what Mr Cavusoglu has to say", in comments broadcast on the Rossiya 24 news channel.
It would be the first time the men have met since the downing of the jet.
Turkey said the Russian SU-24 fighter plane intruded into its airspace and ignored repeated warnings to leave.
The two sides have important economic ties, and in the wake of the incident Moscow imposed visa requirements for Turkish visitors, and placed restrictions on trade with Ankara.
Russia's defence ministry has accused the family of Turkish President Recep Tayyip Erdogan of being directly involved in the trade of petroleum with the Islamic State group.