The Justice Department opened a 30-day review of Clinton's involvement in campaign money raising irregularities in the last day or two, officials said. The White House was notified on Friday.
Reno must now determine whether to launch a more extensive, 90-day investigation that could lead to her requesting the appointment of a special prosecutor.
During this 30-day review, Clinton's attorneys hope to convince the Justice Department there is not enough evidence against him to even begin the 90-day review.
"The Justice Department is reviewing whether allegations that the president illegally solicited campaign contributions on federal property should warrant a preliminary inquiry under the independent counsel act," Justice Department spokesman Myron Marlin said.
A similar initial review is already under way in the case of Vice President Al Gore.
"We understand the Department of Justice is in the process of determining whether a preliminary investigation is warranted," said White House attorney Lanny Davis. "We are cooperating and will continue to cooperate with the Department of Justice to ensure that it has all the information it needs.
"We are confident that no laws were broken," Davis said.
Word of Reno's action came one day after officials told the AP that Gore had hired two defense attorneys to try to head off the appointment of a special prosecutor. Clinton already retains defense attorney David Kendall for Whitewater counsel.
Kendall said he expected Justice to resolve the matter speedily, and used language similar to Davis: "No laws were broken and any kind of enforcement action would be absolutely unprecedented."
Congressional and FBI investigators have been conducting a sweeping inquiry into the actions of Clinton, Gore and senior White House officials to raise money for the 1996 presidential election, including allegations that foreign donations were funneled to the campaign.
Although White House officials said they did not know how Reno reached her decision, congressional and Justice Department investigators have been studying whether Clinton made fund-raising calls from the Oval Office. The president has said he does not remember making any fund-raising calls, and White House officials contend he and Gore are exempt from the law that prohibits fund raising in government buildings.
A federal law enforcement source, who spoke on condition of anonymity, said the initial inquiry was opened this week and deals with whether the president violated a statute against raising campaign funds on federal property by making telephone calls from the White House.
Former White House chief of staff Harold Ickes told Senate investigators last June that Clinton made several fund-raising calls at his request. Ickes said he asked Clinton to make such calls on two to four occasions, and he subsequently learned the president had made several calls.
Time magazine reports in its current edition that Reno acted after a Justice-FBI task force review of the president's telephone calls showed some that appeared to have generated donations that landed partly in so-called hard accounts, rather than soft money contributions that Reno had suggested earlier would be exempt from the ban on raising money on federal property.
The magazine said that shortly after The Washington Post's disclosure that donations solicited by Gore had been moved to hard-money accounts, authorities agreed the task force also should analyze Clinton's calls and subsequently determined that Clinton's calls raised the same legal question that prompted Reno to trigger the 30-day clock for the Gore calls.
The law at issue traditionally has been enforced against federal officials collecting donations from co-workers or subordinates to protect civil service workers from political pressure, according to the Congressional Research Service.
If Reno eventually names a special prosecutor, it would be the second active investigation of Clinton. Special prosecutor Kenneth Starr already is investigating Clinton and his wife, Hillary Rodham Clinton, in the Whitewater affair, a catchall term covering actions that began as a result of the Clintons' investment in an Arkansas land development in the 1970s.
Reno's decision was disclosed while Clinton was in California for three fund-raising events to collect $1 million for the debt-ridden Democratic Party. Aides said Clinton had no plans to comment to reporters traveling with him.
Although the Justice Department informed White House counsel Charles F.C. Ruff about Reno's decision Friday, Clinton wasn't told until Saturday morning. The president spent the day Friday dropping off his only daughter, Chelsea, at Stanford University.
Just last week, Reno replaced the lead prosecutor and top FBI investigator and added additional staff on her campaign-fund raising task force. Reno was said to be unhappy with the pace of the probe. The new prosecutor is Charles La Bella, a veteran white-collar prosecutor from San Diego.
Republicans have clamored for an independent counsel since the first disclosures last fall. Thus far, Clinton's standing in polls has not been harmed, though Gore's ambitions to succeed him in 2000 are threatened by the cloud hanging over the administration.
"Coupled with the attorney general's prior action as to Vice President Gore, it certainly looks as if independent counsel will ultimately be appointed," said Sen. Arlen Specter, R-Pa.
Gore hired two private attorneys _ Jim Neal of Nashville, Tenn., and George Frampton of Washington _ to handle the case.
"The vice president wanted private counsel so he can get his position presented directly and personally to the Department of Justice," Gore spokeswoman Lorraine Voles said Friday.
Reno has until the first week of October to complete an initial 30-day review about the possibility of conducting a formal investigation into whether an independent counsel should be appointed to look into Gore's fund raising.
Gore insists he broke no rules.
In March, Gore acknowledged he had made phone solicitations to 48 Democratic donors from his White House office between November 1995 and May 1996. Federal law prohibits federal officials from making fund-raising solicitations on government property, although experts disagree whether that statute applies to calls made to donors outside the building.
Justice is also investigating allegations that former Energy Secretary Hazel O'Leary solicited a $25,000 charitable contribution in return for a meeting with a Chinese government official.
O'Leary said she continues to cooperate with federal investigators, but
she expects to be cleared of any wrongdoing.