Cardinal George Pell is the Vatican's de facto treasury minister and is the highest-ranking Vatican official to be charged with sexual abuse.
He faces "multiple charges in respect of historic sexual offences" from multiple complainants, said police in the Australian state of Victoria, where Pell was a country priest in the 1970s.
The police did not specify the charges against Pell, 76, nor the ages of the alleged victims nor when the crimes were alleged to have occurred.
The Australian Catholic Church said in a statement that Pell strenuously denied the charges and planned to return to Australia to "clear his name".
"He said he is looking forward to his day in court and will defend the charges vigorously," the statement said. It also said his doctors would advise on his travel arrangements.
Pell angered victims at a government inquiry into institutional child abuse in Australia last year by saying he was too sick to fly home, testifying instead from Rome.
He was ordered to appear before Melbourne Magistrates Court on July 18. The cardinal was due to make a statement at the Vatican later on Thursday.
The latest development in the long-running Pell case piled pressure on the pope to make good on promises to sack bishops found guilty of abuse, or of covering it up.
Francis told reporters last year he would wait until Australian justice took its course before taking a position on Pell, and that his financial controller since 2014 should not undergo trial by media.
"It's in the hands of the justice system and one cannot judge before the justice system," the pope said at the time. "After the justice system speaks, I will speak."
Pell told the Australian inquiry last year the Church had made "catastrophic" choices by refusing to believe abused children, shuffling abusive priests from parish to parish and relying too heavily on the counsel of priests to solve the problem.
Francis's attempts to root out sexual abuse in the Church have hit stumbling blocks.
Marie Collins, the top non-clerical member of a papal commission on abuse, resigned in frustration earlier this year, citing "shameful" resistance to change within the Vatican.
Church sexual abuse broke into the open in 2002, when it was discovered that U.S. bishops in the Boston area moved abusers instead of defrocking them. Similar scandals have since been discovered around the world and tens of millions of dollars have been paid in compensation.
Thousands of cases have come to light as investigations have encouraged long-silent victims to go public.
"I would suspect (the charges against Pell) are going to be stunning to the Vatican and to the pope himself," said Thomas P. Doyle, the U.S. priest whose report on sexual abuse in the Church led to the discovery of cover-up practices in Boston.
Under previous popes, the Vatican, a sovereign state in the middle of Rome, sheltered officials wanted by other countries.
In the early 1980s, the Vatican refused to hand over to Italy Archbishop Paul Marcinkus, an American who was then head of the Vatican bank and was wanted for questioning about the fraudulent bankruptcy of a private Italian bank.
Cardinal Bernard Law of Boston moved to Rome after a sexual abuse scandal erupted in his diocese and has been living in the Italian capital for more than 15 years.
Victims groups were outraged when Law, now 85 and retired, was given a plum job as chief priest at a Rome basilica by the late Pope John Paul.
However, Francis was tough in the case of Jozef Wesolowski, a former archbishop who was accused of paying for sex with minors while serving as papal ambassador in the Dominican Republic.
Wesolowski was recalled in 2013, defrocked and arrested in the Vatican in 2014 but died shortly before his trial was due to start in 2015.
Victims' support groups say successive popes have failed to grasp the gravity of the situation.
"It would be naive for us to assume that people will be only relieved," Neil Woodger, vice president of the In Good Faith Foundation, said of the charges against Pell.
"They're going to be experiencing a bit of distress as well," he said. "It is a result that I think points to justice working and that justice is there for everybody."
Woodger's foundation says it represents 460 victims of Catholic Church abuse in Australia.
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