He is accused along with his son, Bello Abba Mohammed, of diverting $1.5m (Â£1m) that was meant to buy arms for soldiers fighting Islamist Boko Haram militants.
The two men have pleaded not guilty.
President Muhammadu Buhari, who took office in May, set up an investigation into the procurement of weapons for the military which found that phantom contracts worth $2bn had been awarded.
Last month, former national security adviser Sambu Dasuki was arrested and charged with 19 counts of fraud, money laundering and criminal breach of trust in connection to the case.
Mr Dasuki, who oversaw the fight against Boko Haram while Goodluck Jonathan was president, denied the charges.
Bello Haliru Mohammed served as Mr Jonathan's defence minister from 2011 to 2012 and still holds a senior position in the opposition People's Democratic Party (PDP).
He appeared at the Abuja High Court on Tuesday in a wheelchair and was transferred to a hospital when the case was adjourned, the Economic and Financial Crimes Commission (EFCC) said.
His son was remanded in prison until a bail hearing on Thursday.
Boko Haram has killed thousands in north-eastern Nigeria in its six-year campaign to create an Islamic state.
Soldiers had complained that despite the military's huge budget, they were ill-equipped to fight.
The soldiers have reported that they are better equipped since President Buhari came into office, but the previous president's supporters say this is because those weapons were ordered while Mr Jonathan was in power, says the BBC's Abuja editor BBC's Bashir Sa'ad Abdullahi.
Former Nigerian defence minister Bello Haliru Mohammed has been charged with money laundering.