Nurpashi Kulayev, a 24-year-old Chechen, faces nine charges, including murder and terrorism.
Russia's Deputy Prosecutor-General Nikolai Shepel told the Supreme Court of North Ossetia, where the hostage-taking took place, that Kulayev's alleged crimes warrant the death penalty.
Russia imposed a moratorium on capital punishment in 1996.
The hostage-taking crisis ended after three days, when Russian security forces stormed the school. In all, 330 people died. Roughly half of them children.
Kulayev has reportedly confessed to taking part in the raid but denies the murder charges.
Russian authorities say Kulayev is the lone surviving hostage-taker.
A group of victims' relatives announced a hunger-strike today to protest the Russian authorities' decision to end the investigation. The relatives say authorities bear part of the blame for the bloodshed.
(Interfax, ITAR-TASS, AFP)