The government joined a civil suit against Armstrong, stripped of his Tour de France titles and banned for life from cycling in 2012 after accusations he had cheated for years. In January, he said the accusations were true in an interview with television host Oprah Winfrey.
A battle with the US government over civil fraud charges threatens to sap what remains of the once-revered athlete's reputation, and hurt his wallet.
Armstrong and his teammates from Tailwind Sports wore the logo of the Postal Service during their record-breaking wins.
"This lawsuit is designed to help the Postal Service recoup the tens of millions of dollars it paid out to the Tailwind cycling team based on years of broken promises," Ronald Machen, the US attorney for Washington, said in a statement.
The sponsorship money totaled more than $30 million, the government said.
Armstrong plans to contest the suit because the Postal Service was not actually damaged, his lawyer, Robert Luskin, said.
"The Postal Service's own studies show that the service benefited tremendously from its sponsorship - benefits totaling more than $100 million," the lawyer said in a statement.
Prosecutors have said they do not expect to charge him with a crime.
Former Armstrong teammate Floyd Landis filed a sealed whistleblower suit against Armstrong in 2010. The decision by the government to join the suit triggered its unsealing.
Lawyers for Landis did not respond to requests for comment.
WHISTLEBLOWER LAW
The government is suing under the False Claims Act, an 1863 law that encourages private individuals to file suit when they have evidence of fraud involving government money.
When the government believes a suit has merit, it may take over the litigation. The individuals, or whistleblowers, get a portion of the proceeds if the case is successful.
Since the law was revitalized in 1986, it has been used frequently against military contractors, pharmaceutical companies and hospitals.
Armstrong is prepared to argue that claims over most of the sponsorship money are time-barred, a source close to his legal team said, speaking on condition of anonymity. The sponsorship agreement expired in 2004, and there is a six-year statute of limitations on recovery under a US anti-fraud law, the source said.
The source raised two other arguments that could help Armstrong. First, the sponsorship contract did not contain specific language or promises related to doping.
Second, Armstrong was not in charge of Tailwind Sports, the racing team firm that signed the contract with the Postal Service and that existed before Armstrong joined it.
Luskin is among the most sought-after defense lawyers in Washington. He represented former White House adviser Karl Rove in a case about the leak of a CIA officer's name.
