Finding "reasonable grounds to suspect that an offence or offences may have occurred", the watchdog will be examining whether transactions related to the refurbishment of the Prime Minister’s flat were reported properly.
The news follows several days of questioning about how Johnson funded works on the flat above number 11 Downing Street, with leaked emails revealing that Tory donor Lord Brownlow offered the Conservative Party a £58,000 donation last year.
According to emails reportedly seen by the Daily Mail, the payment was intended to cover “the payments the party has already made on behalf of the soon to be formed 'Downing Street Trust'".
The Tory peer is also reported to have mentioned a donation of £15,000.
While this donation – of £15,000 – is mentioned on Electoral Commission records, it is unclear what happened to the other sum of £58,000.
The government have been looking into whether the creation of a trust – with Lord Brownlow agreeing to be chairman – to fund upgrades to Johnson’s residence would be possible.
As of yet, however, no trust currently exists, and the Prime Minister has indicated that he paid for the refurbishment of his flat – shared with fiancee Carrie Symonds – using personal funds.
Neither Number 10 nor the Conservative Party, however, have denied reports that Conservative Campaign Headquarters paid the Cabinet office in order to finance initial costs.
An Electoral Commission spokesperson said of the investigation being launched:
"We have been in contact with the Conservative Party since late March and have conducted an assessment of the information they have provided to us.
"We are now satisfied that there are reasonable grounds to suspect that an offence or offences may have occurred. We will therefore continue this work as a formal investigation to establish whether this is the case.
"The investigation will determine whether any transactions relating to the works at 11 Downing Street fall within the regime regulated by the Commission and whether such funding was reported as required.
"We will provide an update once the investigation is complete. We will not be commenting further until that point."
It is reported that the Prime Minister or the Conservative Party could be fined up to £20,000 if found to have broken the law.