Hussain had earlier arrived at a London police station after his bail expired, Dawn news reported.
"Altaf Hussain... was charged under section 1(2) of the Terrorism Act (TACT) 2006 with encouraging terrorism," the Met Police said in a statement on its website.
The charge as stated by the UK police is that Hussain "on August 22, 2016 published a speech to crowds gathered in Karachi, Pakistan which were likely to be understood by some or all of the members of the public to whom they were published as a direct or indirect encouragement to them to the commission, preparation or instigation of acts of terrorism and at the time he published them, intended them to be so encouraged, or was reckless as to whether they would be so encouraged".
The MQM founder will now appear in custody at Westminster Magistrates' Court on later on Thursday.
According to the Met Police, "Hussain was previously arrested on June 11 on suspicion of intentionally encouraging or assisting offences contrary to Section 44 of the Serious Crime Act 2007. He was released on bail and subsequently charged as above".
Earlier on Thursday, Hussain had reached the Metropolitan Police Southwark Police Station, accompanied by a handful of London-based supporters.
This was his third appearance at the station in connection with the case, Dawn reported.
On September 12, the MQM chief was grilled for five hours at the same police station in connection with the case. He was released with an extension in his bail.
The MQM founder was arrested by the Met Police on June 11 as part of the investigation into his alleged hate speeches.
However, he was released on bail a day later by the British authorities without filing charges relating to the probe.
( With inputs from IANS )