The company's "lax oversight and misleading privacy settings" allowed United Kingdom political consultancy Cambridge Analytica to gain access to the personal information of Facebook users without their permission, according to the attorney general's office.
The scandal stems from the use of Facebook user data by the British political consulting firm Cambridge Analytica, which has been accused of using that data to target voters during President Donald Trump's winning 2016 presidential campaign.
Washington, D.C. Attorney General Karl Racine said Facebook misled users because it had known about the incident for two years before disclosing it.
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In 2013, a researcher launched a Facebook app that claimed to generate a personality profile. Previously, Facebook declined to make its chief executive, Mark Zuckerberg, available to testify in front of lawmakers from the United Kingdom and eight other countries that remain concerned about the Cambridge Analytica controversy.
Facebook's head of developer platforms and programs, Konstantinos Papamiltiadis, said in a blog post that the Times report referred to partnerships that enabled "social experiences - like seeing recommendations from their Facebook friends - on other popular apps and websites".
There was no immediate comment from Facebook.
Facebook has reportedly already produced "reams of documents" in response to the attorney general's investigation, officials said.
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It is well known that Facebook makes its money through our personal data and we have realised just how bad that has been.
In an interview, Steve Satterfield, Facebook's director of privacy and public policy, said none of the partnerships violated users' privacy or the F.T.C. agreement.
The incoming chair of the House Judiciary Committee's antitrust subcommittee, Representative David Cicilline, tweeted: "Zuckerberg told Congress that Facebook users had "complete control" over their data".
Facebook could be levied a civil penalty of $5,000 per violation of the region's consumer protection law, or potentially close to $1.7 billion, if penalized for each consumer affected.
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He described Facebook's cooperation as "reasonable", but said that a lawsuit was necessary "to expedite change" at the company.