State Controller Thomas DiNapoli announced he's suing BP on behalf of the state pension fund.
DiNapoli, the sole trustee of the $132.6 billion fund, decided on the lawsuit because the April 20 explosion that sent oil gushing into the Gulf of Mexico has trashed BP's stock.
In a statement, DiNapoli accused BP of misleading investors about its safety procedures and its ability to respond to events like the ongoing oil spill.
"We're going to hold it accountable," the New York Democrat said.
The Daily News first reported the possibility of the lawsuit last week while revealing that state pension fund lost $30 million on its slumping BP shares.
"It's my duty to protect the interests of the fund and the retirees and employees who rely on it," DiNapoli said Wednesday.
DiNapoli hired Cohen Milstein Sellers & Toll to represent the fund, which will seek lead plaintiff status in order to give "the fund and other investors their best chance at recovering damages."
DiNapoli said the fund once held more than 19 million BP shares, before recently selling off 1.5 million shares.
BP stock as of midday Wednesday was trading at $29.67 a share, a huge drop from the $60.48 a share before the catastrophe.
It's unclear whether the city pension fund system will join the lawsuit.
The city's five pension funds, valued at about $100 billion, as of last week held $110 million in BP stock, less than half of the $228 million the city held a month before the disaster.
The city pension funds sold off 10 million BP shares since the beginning of April, and now hold about 15 million shares.