President Bush faces the biggest political crisis of his presidency following the resignation of a top White House aide who faces charges of obstruction of justice and perjury over the leaking of a CIA agent's identity.
If he is convicted on all five charges Lewis "Scooter" Libby, chief-of-staff to vice-president Dick Cheney, could face up to 30 years in prison.
President Bush's top adviser Karl Rove escaped indictment yesterday, but he could face charges as special prosecutor Patrick Fitzgerald's investigation continues.
The indictment came at the end of Mr Bush's most difficult political week during which the US death toll in Iraq passed 2,000 and the president's nominee for the supreme court, Harriet Miers, withdrew after a revolt by conservative Republicans.
Mr Fitzgerald said Mr Libby lied to FBI agents who questioned him about how Valerie Plame Wilson's identity as a CIA officer became public, and repeated those lies under oath before a grand jury.
Ms Wilson's husband, former ambassador Joseph Wilson, is a critic of the Bush administration who debunked a White House claim that Saddam Hussein tried to import nuclear materials from Niger.
"In an investigation concerning the compromise of a CIA officer's identity, it is especially important that grand jurors learn what really happened. The indictment returned today alleges that the efforts of the grand jury to investigate such a leak were obstructed when Mr Libby lied about how and when he learned and subsequently disclosed classified information about Valerie Wilson," Mr Fitzgerald said.
The indictment alleges that Mr Libby claimed he first heard that Ms Wilson worked for the CIA from reporters when in fact he heard it from White House sources, including Mr Cheney, and spread the information to reporters.
"Mr Libby's story that he was at the tail-end of a chain of phone calls, passing on from one reporter what he heard from another, was not true. It was false. He was at the beginning of the chain of the phone calls, the first official to disclose this information outside the government to a reporter. And he lied about it afterward, under oath, repeatedly," said Mr Fitzgerald.
The special prosecutor, whose parents came to the US from Co Clare, said although the grand jury's term elapsed yesterday after two years, his investigation would continue.
He did not rule out indicting other officials in connection with the leak, and Mr Rove's lawyer, Robert Luskin, acknowledged that his client remains in legal jeopardy.
"We are confident that when the special counsel finishes his work he will conclude that Mr Rove has done nothing wrong," he said.
Within minutes of yesterday's indictment Mr Libby resigned, and Mr Bush said afterwards that he had accepted the resignation.
"Scooter has worked tirelessly on behalf of the American people and sacrificed much in the service to this country. He served the vice-president and me through extraordinary times in our nation's history.
"Special counsel Fitzgerald's investigation and ongoing legal proceedings are serious, and now the proceedings - the process - moves into a new phase. In our system each individual is presumed innocent and entitled to due process and a fair trial," he said.
Through his lawyer yesterday, Mr Wilson said he believed that revealing his wife's secret CIA identity was harmful to the country and that his family was attacked because he spoke out about the events that led to the Iraq war.