The announcement followed a pre-trial hearing last month for Staff Sgt Robert Bales (39) who faces premeditated murder and other charges over the attack on two villages in southern Afghanistan in March.
The killings drew such angry protests that the US temporarily halted combat operations in Afghanistan and it was three weeks before American investigators could reach the scenes.
Prosecutors said Bales left his Afghanistan base early on March 11, attacked one village and returned to the base, then slipped away again to attack another nearby compound.
Of the 16 people killed, nine were children.
No date has been set for Bales' court-martial.
His civilian lawyer, John Browne, said he met army officials last week to argue that his client should not face the possibility of the death penalty, given that Bales was on his fourth deployment in a war zone when the killings occurred.
"The army is not taking responsibility for Sgt Bales and other soldiers that the army knowingly sends into combat situations with diagnosed post-traumatic stress disorder, concussive head injuries and other injuries," Mr Browne said.
"The army is trying to take the focus off the failure of its decisions and the failure of the war itself, and making Sgt Bales out to be a rogue soldier."
During last month's preliminary hearing, prosecutors built a strong eyewitness case against him, with troops recounting how they saw Bales return to the base alone, covered in blood.
One soldier said Bales woke him up in the middle of the night, saying he had just shot people at one village and that he was heading out again to attack another.