The 41-year-old, named by Australian media as Oliver Schulz, is the first serviceman or veteran to be charged with a war crime under Australian law.
The charge came after an investigation found that 19 Australian special forces soldiers could face charges for illegal conduct during the conflict.
“It will be alleged he murdered an Afghan man while deployed to Afghanistan,” Australian Federal Police said.
The former Special Air Service regiment trooper is expected to appear before a Sydney court within days, when a magistrate will likely consider whether he can be released from custody on bail.
The Australian Broadcasting Corporation (ABC) reported Mr Schulz is the person referred to as Soldier C in a 2020 ABC Four Corners documentary exposing alleged war crimes.
Footage showed Soldier C shooting an Afghan man in a wheat field in Uruzgan Province in southern Afghanistan in 2012.
Schulz faces a potential sentence of life in prison if convicted.
Police are working with the Office of the Special Investigator, an Australian investigation agency established in 2021, to build cases against elite SAS and Commando Regiments troops who served in Afghanistan between 2005 and 2016.
A military report released in 2020 after a four-year investigation found evidence that Australian troops unlawfully killed 39 Afghan prisoners, farmers and civilians.
The report recommended 19 current and former soldiers face criminal investigation.
At the time, the Australian Defence Force blamed crimes on an unchecked “warrior culture" among some soldiers.
More than 39,000 Australian military personnel served in Afghanistan during the 20 years until the 2021 withdrawal, and 41 have been killed there.