Orange County District Attorney Jim Woodall said Nyang'oro, 59, took $12,000 for a class he did not teach.
The African and Afro-American Studies program has been at the center of an investigation into alleged academic fraud involving Tar Heel football players.
Nyang'oro faced a judge for the first time Tuesday, where he pleaded not guilty.
His lawyer says the professor will fight the felony charge.
"Dr. Nyang'oro is presumed to be innocent under our law. There's been one side of this story that's been put forth in the press, but he's going to have an opportunity to present his side. And we intend to present this case in court. He's going to contest these charges, and he'll be entering a plea of not guilty," said attorney Bill Thomas.
Nyang'oro will be back in court December 17.
UNC President Tom Ross said Monday he fully supports Woodall's decision to seek an indictment.
"There have been multiple investigations and reviews of these matters that should give us all assurance that we have taken all reasonable and available steps to uncover the facts of this situation," Ross said in a statement.
Last May, Woodall officially asked the State Bureau of Investigation to look into activities within the African and Afro-American Studies program. He said he wanted to know if there was any academic fraud, financial fraud, computer fraud, any forgery, or conspiracy to conceal any crimes.
A UNC review of classes within the department found 54 department classes that had little or no indication of instruction along with at least 10 cases of unauthorized grade changes for students who did not do all the work.
The classes were popular with athletes. They made up about 45 percent of enrollments. Nyang'oro stepped down from his chairmanship shortly after UNC began investigating the classes in 2011. He retired in 2012.
ABC11 has reached out to Nyang'oro numerous times for comment and he has not responded.
Ross said Monday that UNC-Chapel Hill and the UNC system have implemented extensive new policies, procedures, and safeguards to prevent similar problems from ever happening again
"We will continue to explore additional ways to ensure the integrity of the academic experience at UNC-Chapel Hill and all UNC campuses," said Ross.
UNC Faculty Chair Jan Boxill echoed a statement from the university saying it hopes this is the end of the investigation.
"I think all of us are upset that it ever happened,'" she said.
"The action described in today's indictment is completely inconsistent with the standards and aspirations of this great institution. This has been a difficult chapter in the university's history, and we have learned many lessons. I am confident, because of effective processes already put in place, we are moving ahead as a stronger institution with more transparent academic policies, procedures, and safeguards," added Chancellor Carol Folt in a statement issued.
Boxill says the new policies are already working.
"I don't think there are any phantom classes. I think that's, that is clearly one thing that's not, you know, not even possible right now," she said.
However, some UNC students are still skeptical.
"I would like to know that that isn't just talk. I would like to make sure there are actual real policies being put in place. And I'd like there to be some more transparency because this kind of thing should never be allowed to happen again," said Logan Porter.
"Maybe if we see a number of consistent years with no problems then we'll start to realize, okay the African-American Studies Department isn't a joke anymore. They actually, there won't be any more scandals, the athletes are here to go to school and play the sport as well," said Toby Egbuna.