The indictment obtained by ABC11 Eyewitness News accuses Sherrod Peace of trafficking crack cocaine and possessing a .45 caliber pistol.
Peace left the Durham PD last month.
Multiple sources have told ABC11 that the city was first alerted about Peace's activities and immediately launched an internal probe after learning he was distributing drugs out of his patrol car.
The Durham Police Department issued a statement late Thursday saying it investigated Peace with assistance from the federal Drug Enforcement Administration.
The department said Police Chief Jose Lopez got a complaint in early October 2009 that Peace was involved in illegal activities and immediately started both a criminal and an internal investigation.
"We take any allegation of misconduct by our employees very seriously and thoroughly investigate all complaints. Law enforcement officers take an oath to serve and protect the community and we must be held to a high standard," Lopez said.
Peace joined the Durham Police Department in 2003 and was assigned to the Uniform Patrol Bureau. He resigned on December 31.