The 23-year-old Italy international was withdrawn from his country's squad prior to the Euro 2024 qualifying defeat to England at Wembley on Tuesday night and his club have released a statement to say he is co-operating with the enquiry.
The Premier League club said: "Newcastle United can confirm that Sandro Tonali is subject to investigation by the Italian Prosecutor's Office and Italian Football Federation (FIGC) in relation to illegal betting activity.
"Sandro is fully engaging with the investigation and will continue to cooperate with all relevant authorities. He and his family will continue to receive the club's full support.
"Due to this ongoing process, Sandro and Newcastle United are unable to offer further comment at this time."
A statement from the FIGC said last week: "The federation announces that this afternoon the Turin public prosecutor’s office has conducted investigations into players, Sandro Tonali and Nicolò Zaniolo, who are currently training with the national team at the Coverciano Federal Training Centre.
“Regardless of the nature of the events, considering that the two players are not in the necessary condition to face the matches scheduled for the next few days, the federation has decided, also for their protection, to allow them to return to their respective clubs.”
Juventus midfielder Nicolo Fagioli has already been handed a seven-month suspension by the FIGC for breaching betting rules.
Fagioli had five months of a one-year ban suspended and was fined 12,500 euros (£10,848), while he agreed to a therapy plan of at least six months to tackle his gambling problem, the FIGC announced.
Tonali, who has 15 senior caps for Italy, was signed by Newcastle from Milan for £55million in July and has made seven Premier League appearances.
Additional reporting by PA Sport.