Local media reported that the investigation was one of the most "important" anti-graft operations in the country's history and could strike a blow to Lieberman's Yisrael Beitenu party just three months away from a general election.
According to police, "millions" of shekels of public funds have allegedly been transferred to organisations close to the party.
Officials implicated include the deputy interior minister Faina Kirshenbaum, who has been questioned by police. Her daughter Ronit will remain in custody until Sunday, the spokeswoman said.
Former tourism minister Stas Misezhnikov was also detained.
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Others under investigation include Yisrael Beitenu's former campaign chief, the former presidents of the basketball and handball federations and several officials in charge of settlement operations in the West Bank and Golan Heights.
A total of 24 people have been arrested while another four remain under house arrest, the spokeswoman added.
According to a recent opinion poll conducted by Israeli military radio, 40 percent of people who voted for Yisrael Beitenu in the last general election said they were reconsidering their support for the party in the wake of the scandal.
Lieberman refused to comment on the investigation.
The foreign minister had been forced to leave the post in December 2012 following a corruption probe, but was reinstated in November last year.
Israelis will head to the polls on March 17 for the second general election in just over two years after Prime Minister Benjamin Netanyahu dissolved parliament in December following the breakdown of his coalition government.