Robert E. Crimo III, 21, is suspected of shooting his victims from a sniper's perch on a rooftop above the parade in the suburb of Highland Park, Illinois.
He would face a mandatory sentence of life in prison without the possibility of parole if convicted, Illinois state attorney Eric Reinhart said.
Reinhart said the murder indictments would be followed by "dozens more charges" and he would ask that Crimo remains in custody without bail at the suspect's first court appearance, scheduled for Wednesday.
It was not immediately clear whether Crimo had a lawyer.
The 21-year-old had planned the attack for weeks, officials said on Tuesday.
They said he fired more than 70 rounds at random into the crowd watching Monday's parade, and dressed in women's clothes to help conceal his identity and blend in with the panic-stricken crowd as he fled.
"He blended right in with everybody else as they were running around, almost as if he was an innocent spectator as well," said Sergeant Chris Covelli, a spokesman for the Lake County Sheriff's office, adding the suspect has distinctive facial tattoos.
In addition to the seven victims killed by gunfire, more than three dozen others were treated in hospitals for gunshot wounds and other injuries.
Covelli said Crimo had two previous encounters with law enforcement - an April 2019 emergency-911 call reporting he had attempted suicide and another in September of that year regarding alleged threats "to kill everyone" directed at family members.
Police responding to the second incident seized a collection of 16 knives, a dagger and a sword amassed by Crimo in his home, though no arrest was made as authorities at the time lacked probable cause to take him into custody, Covelli said.
But a state 'red flag' system, designed to allow police to seek a court order to seize weapons from people who are deemed a danger to themselves or others, appeared to have broken down.
The shooting took place in a neighbourhood with a large Jewish population, but police had no immediate evidence of any anti-Semitic or racist basis.
Investigators were reviewing videos Crimo had posted on social media containing violent imagery.
The suspect used a high-powered rifle for the attack, similar to an AR-15, which he dropped at the scene.
He had a similar rifle in his mother's car, which he was driving when police took him into custody, and owned other firearms, all of which were bought legally in Illinois, officials said.
In all, Crimo had purchased five firearms, including rifles and pistols.
Highland Park Mayor Nancy Rotering said the community of 30,000 was in shock.
"This tragedy should have never arrived at our doorsteps," she told NBC News.
"As a small town, everybody knows somebody who was affected by this directly and, of course, we are all still reeling."
The US Supreme Court last month asserted a constitutional right to carry weapons in public in a ruling making it easier for pro-gun groups to overturn modern gun regulations.
It has since thrown out a lower court ruling upholding Maryland's ban on assault weapons.
Congress last month passed its first major federal gun reform in three decades, providing federal funding to states that administer red flag laws.
The law does not ban sales of assault-style rifles or high-capacity magazines.
Rotering said on Tuesday she did not know where the gun the gunman used came from but added that it was legally obtained.
"Our nation needs to have a conversation about these weekly events involving the murder of dozens of people with legally obtained guns," she said.
The suspect's father, Bob Crimo, ran Bob's Pantry and Deli in Highland Park for at least 18 years, according to a Chicago Tribune business profile.
Bob Crimo closed the deli in 2019 before he unsuccessfully ran against Rotering for mayor of Highland Park.
