Terry, who has denied the allegations against him stemming from an incident during Chelsea's Premier League match at Loftus Road in October, will appear at West London Magistrates' Court on February 1.
Alison Saunders, Chief Crown Prosecutor for London said: "I have today advised the Metropolitan Police Service that John Terry should be prosecuted for a racially aggravated public order offence following comments allegedly made ... on 23 October 2011.
"The decision was taken in accordance with the Code for Crown Prosecutors and after careful consideration of all the evidence I am satisfied there is sufficient evidence for a realistic prospect of conviction and it is in the public interest to prosecute this case.
"He is now summonsed with a criminal offence and has the right to a fair trial"
Immediately after the original allegations were made, Terry denied making any racist comments and reiterated that view following the CPS's announcement.
"I am disappointed with the decision to charge me and hope to be given the chance to clear my name as quickly as possible,'' said Terry in a statement. "I have never aimed a racist remark at anyone and count people from all races and creeds among my closest friends.'
"I will fight tooth and nail to prove my innocence. I have campaigned against racism and believe there is no place for it in society.''
A club statement read: "Chelsea Football Club today received notification that the Crown Prosecution Service has charged John Terry with a racially aggravated public order offence.
"John has made it clear he denies the charge and is determined to do all he can to prove his innocence. Chelsea FC has always been fully supportive of John in this matter and will continue to be so.
"The club finds all forms of discrimination abhorrent and we are proud of the work we undertake campaigning on this important issue. Chelsea will not be commenting further on the subject while the legal process runs its course."
Just hours prior to Wednesday's ruling, Chelsea manager Andre Villas-Boas vowed that he and the club would give Terry their full backing.
"The only thing I know is that I will be fully supportive of John Terry, whatever the outcome,'' Villas-Boas said. "He has my full support, he has the club's full support. We know exactly his human values and personality. They are never in doubt.''
The CPS decision comes barely 24 hours before Chelsea's Premier League game at Tottenham, the start of a run of four games in 11 days, but Villas-Boas confirmed Terry would start at White Hart Lane on Thursday night.
A statement from the FA read: "Further to the announcement by the Crown Prosecution Service (CPS) today [21 December] regarding the allegation against John Terry following the Queens Park Rangers v Chelsea fixture on Sunday 23 October 2011, The Football Association will not be making any comment at this time."
On Tuesday, Liverpool striker Luis Suarez was handed an eight-match ban for racially abusing Manchester United's Patrice Evra during a Premier League match at Anfield on October 15.
The Uruguay international, who is expected to appeal against the Football Association's decision, was also fined £40,000.