They also recommended his wife, Sara Netanyahu, face charges of bribery, fraud, breach of trust and obstruction of evidence.
Despite his dominance of Israeli politics, the newest police recommendation comes just after his right-wing coalition's majority was reduced to a precarious one seat in parliament.
A statement issued on Sunday says that Netanyahu is suspected of accepting bribes in exchange for policy decisions that favored Shaul Elovitch, a media mogul that controlled Israel's largest telecom firm, Bezeq, and the Walla News website.
The decision whether to indict falls to Attorney General Avihai Mandelblit, who still hasn't ruled on the two other corruption cases in which police have already said Netanyahu should be indicted.
The prime minister has argued that he is the victim of a left-wing and media conspiracy to topple his conservative government.
This is the third such police recommendation against Netanyahu in recent months.
Israelis have been holding protests to demand the prime minister's resignation over the corruption scandals, but Netanyahu has described the events as part of efforts meant to topple him "at any cost".
Former journalists at the Walla news site have attested to being pressured to refrain from negative reporting of Netanyahu.
The Israeli attorney-general will now have to decide whether to bring charges in the case. "These recommendations were decided upon and leaked even before the investigation began".
Police recommended that Bezeq's former chairman, Shaul Elovitch, who was forced to step down earlier this year, stand trial for giving bribes.
Both Netanyahu and Elovitch have denied any wrongdoing.
It is claimed Netanyahu and his advisers supported regulations worth hundreds of millions of dollars to telecom company Bezeq.
"A prime minister with so many corruption cases around him can not continue at his job and must resign", Gabbay tweeted. They also said he should be indicted for influence-peddling after discussing a deal with powerful newspaper publisher Arnon Mozes to push through legislation that would hurt a rival daily in exchange for good coverage.
The Prime Minister's wife, Sara Netanyahu, was charged in July with fraud and breach of trust in a separate investigation, alleging misuse of state funds at the couple's official residence. Netanyahu held the government's communications portfolio until a year ago and oversaw regulation in the field.