Namewee, whose real name is Wee Meng Chee, will be investigated for injuring or defiling a place of worship with intent to insult the religion of any class.
The charge carries a jail term of up to two years.
The 33-year-old was arrested yesterday at Kuala Lumpur International Airport after he arrived home from abroad and was produced before the magistrate's court in Penang city this morning.
Namewee, who is also popular in Taiwan, is known for his profanity-laced music.
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Earlier this month, Penang police chief said Namewee's arrest would facilitate the investigation into reports lodged against him over the video which features Penang's floating mosque as a backdrop, among others.
The rapper, however, in a separate video insisted the song was intended to promote religious harmony, The Star reported.
Alleging that Namewee insulted Islam in his latest production, 20 non-governmental organisations lodged police reports against the entertainer who is no stranger to controversy, having gained notoriety for some provocative videos earlier.
The four-minute clip, directed and produced by Namewee, features a Taiwanese band called 'Nine-One-One' and was shot in places of worship in Penang.
Of late, there there have been a number of instances that led to religious tensions, with many expressing concern over the rise of conservative Islamic attitudes.