Benalla is to be investigated for acts of violence committed by someone in public service and impersonating a police officer after Le Monde's revelation that he was the man filmed grabbing a young man by the throat, knocking him to the ground and hitting him, all while wearing a police helmet.
Video of alleged attack by Taha Bouhafs of la France Insoumise
It has since emerged that the Elysée presidential palace was aware of the incident but did not notify prosecutors or fire Benalla.
On Thursday Macron's office said he had been given "the stiffest punishment ever given to someone working at the Elysée".
Shortly after the incident, Benalla was suspended for two weeks and confined to desk duties thereafter.
Another man who was with him, reserve gendarme Vincent Crase who worked for Macron's Republic on the Move (REM) party, suffered the same punishment and no longer works with the Elysée, spokesman Bruno Roger-Petit revealed on Thursday.
Observer turned assailant
The video was filmed by student and left-wing activist Taha Bouhafs at a gathering of young people after the main 1 May demonstration, during which there had been some violence and police and protesters had clashed.
A general invitation to attend the gathering had been published on social media and, according to Bouhafs, several groups of students were sitting on the ground drinking, watched by a small group of CRS riot police, when a larger group of CRS arrived and sealed off the exits, firing teargas and hitting participants with truncheons.
At that point Benalla intervened, first dragging a young woman away, then tackling the young man.
Neither the woman nor the man have yet come forward.
It has since emerged that he had been granted permission to attend the demonstration to "see how a big demonstration is handled", according to Macron's chief of staff, Patrick Stzroda, but only as an observer.
In a letter outlining the disciplinary measures against him, Stzroda told Benalla his "clearly inappropriate behaviour" had "harmed the example expected of agents of the president of the republic in all circumstances".
Hired by Macron's office
Benalla worked in private security before entering the world of politics by becoming part of the security detail of the Socialist Party, working for Lille mayor Martine Aubry and then on François Hollande's 2012 presidential campaign.
He was later assigned to be a chauffeur for former industrial renewal minister Arnaud Montebourg but was fired after a week.
"He caused a traffic accident and wanted to run away," Montebourg told Le Monde.
When several Socialists defected to join Emmanuel Macron's election campaign last year, he joined them and was put in charge of the candidate's security at a salary of 3,500 euros a month.
According to documents published by Wikileaks, he at one point proposed the purchase of a Flash-ball, two rubber-bullet pistols and riot shields, a request that was turned down by the campaign organisers.
After the election he was appointed to the president's security team, acting as a bodyguard for him and acquiring a reputation for a certain level of assertiveness, REM members told Le Monde.
BFMTV has revealed that he was on the open-top bus with France's victorious World Cup squad during their victory parade in Paris on Monday.
Ministers and REM officials were trying to limit the damage on Thursday.
"Nobody is protected in this country, whatever his status," REM chief Christophe Castaner told CNews TV, reassuring his interviewer that "there will be no obstacle to the law doing its work in the best possible way".
Justice Minister Nicole Belloubet said that prosecutors would take the necessary steps "if it seems necessary" but telling MPs that Benalla was "on this demonstration without authorisation", apparently contradicting Stzroda's account.
Asked whether the incident was "a stain on the republic" while on a visit to south-west France, Macron himself was not particularly communicative.
"No, no, the republic is immutable," was his reply.
Opposition politicians were far less restrained.
Mainstream right leader Laurent Wauquiez asked whether the scandal had been hushed up and called on Macron to make a statement.
For the far-right National Rally (previously the National Front), Sébastien Chenu was concerned that the incident might "tarnish the security forces".
Socialist Party leader Olivier Faure also called for clarification.
Eric Coquerel of the hard-left France Unbowed wanted to know why the police had allowed the assault to take place.
"Why was there no legal case?" he asked in a tweet. "Why was a suspension enough for Emmanuel Macron? What is this thug doing in the Elysée's security?"