It was also announced investigators would continue to investigate the alleged role in the affair of Mr Bush's senior political adviser and close confidant, Karl Rove. At the end of an already bruising week for the President, Lewis "Scooter" Libby, chief of staff to Vice-President Dick Cheney, was charged with two counts of perjury, two of making false statements and one count of obstructing justice.
A trial of Mr Libby - who immediately resigned from his position - could lead to an investigation of any role Mr Cheney played. The Vice-President was named in Mr Libby's indictment as his source on the covert CIA agent Valerie Plame's identity. Any hearings could also lead to a much broader examination of how the administration secretly engineered the case for the war in Iraq. Mr Cheney could also find himself as a key witness. Last night, there were already calls on Capitol Hill from Democrats for such a widely-based inquiry.
While the special prosecutor Patrick Fitzgerald indicated he did not, at this stage, intend to charge Mr Rove, the chief investigator pointedly said that his inquiries were not over and left open the option to bring other indictments later.
As a result, Mr Rove will continue to advise Mr Bush within the White House but with a considerable cloud hanging over him at a crucial time for the President. One report suggested that Mr Rove only escaped being charged after providing new information to Mr Fitzgerald during eleventh-hour negotiations.
Mr Fitzgerald said of Mr Libby's indictment: "When citizens testify before grand juries, they are required to tell the truth. Without the truth, our criminal justice system cannot serve our nation or its citizens. The requirement to tell the truth applies equally to all citizens, including persons who hold high positions in government."
He said if the charges against Mr Libby were true it would be "a very, very serious matter".
Mr Bush stepped on to the White House lawn last night to remind reporters that Mr Libby must be "presumed innocent" as he awaits trial. Saying he was "saddened by today's news", Mr Bush also characterised Mr Fitzgerald's inquiry as "serious".
The handing down of the charges followed a twisting, two-year investigation into the leaking in the summer of 2003 of the identity of Valerie Plame, a covert CIA agent and wife of a former ambassador, Joe Wilson.
Mr Wilson had angered the White House when he revealed that claims made by Mr Bush that Iraq was seeking to obtain uranium to re-establish a nuclear weapons programme were false.
Just days after Mr Wilson made his revelations in The Independent on Sunday and The New York Times, a conservative newspaper columnist, Robert Novak, revealed that Ms Plame worked for the CIA and claimed she had recommended her husband for a fact-finding trip to west Africa to investigate allegations that Iraq was seeking to buy uranium from Niger. Mr Novak said that his information came from two "senior administration officials".
In a statement issued last night by his lawyer, Mr Wilson called yesterday a "sad day for America". He added: "I continue to believe that revealing my wife Valerie's secret CIA identity was very wrong and harmful to our nation and I feel that my family was attacked for my speaking the truth about the events that led our country to war."
While Mr Libby was not charged with the actual leaking of Ms Plame's identity, Mr Fitzgerald made clear the seriousness of such an offence. " Disclosure of classified information about an individual's employment by the CIA has potential to damage national security."
Supporters of the President attempted to play down the seriousness of the developments yesterday but the damage of Mr Libby's indictment is considerable and has the potential to get even worse.
As Mr Cheney's chief of staff, Mr Libby, 55, was a key player in the planning of the invasion of Iraq. Any trial could closely examine the roles that he, Mr Cheney and others played in lobbying for the invasion and manipulating intelligence about Saddam Hussein's threat at a time when support for the war had fallen to a record low.
It is unclear what Mr Libby might reveal during a trial. Mr Fitzgerald yesterday accused Mr Libby of lying to FBI agents who interviewed him in October and November of 2003, of committing perjury by lying to a grand jury twice in March 2004 and of "impeding" that jury's investigation.
The indictment added: "The over-arching obstruction of justice count alleges that, while testifying under oath before the grand jury, Libby knowingly and corruptly endeavoured to influence, obstruct and impede the grand jury's investigation by misleading and deceiving the grand jury as to when, and the manner and means by which, he acquired, and subsequently disclosed to the media, information concerning the employment of Valerie Wilson [Plame] by the CIA."
At a press conference, Mr Fitzgerald said Mr Libby had lied to investigators as to what he told several journalists about Ms Plame - claiming that he learnt from them she was a CIA agent. In reality, said Mr Fitzgerald, he had already been told that information from several senior officials, including his boss, Mr Cheney.
Asked whether there was any evidence that Mr Cheney had directed Mr Libby to leak the information, Mr Fitzgerald said he was making no allegations about anyone other than Mr Libby.