"There have been deeply concerning reports of the Grok AI chatbot account on X being used to create and share undressed images of people - which may amount to intimate image abuse or pornography - and sexualised images of children that may amount to child sexual abuse material," Ofcom said in a statement.
The regulator is under pressure to act after Prime Minister Keir Starmer said the images produced by Grok were "disgusting" and "unlawful".
Musk's X had to "get a grip" on Grok, Starmer said on Thursday, adding that Ofcom had the government's full support to take action.
Creating or sharing non-consensual intimate images or child sexual abuse material, including AI-generated sexual imagery, is illegal in Britain.
Additionally, tech platforms must prevent British users from encountering illegal content and remove it once they become aware of it.
X has faced condemnation in other countries over the feature, which can produce images of women and minors in skimpy clothing.
French officials have reported X to prosecutors and regulators, calling the content "manifestly illegal", while Indian authorities have also demanded explanations.
X has restricted the feature to paying users.
It said last week that it removes all illegal content on the platform and permanently suspends accounts involved.
"Anyone using or prompting Grok to make illegal content will suffer the same consequences as if they upload illegal content," it said.
Asked about the subject recently, xAI told Reuters: "Legacy Media Lies."
Ofcom will investigate whether X failed to assess the risk that people in Britain would see illegal content, and whether it considered the risk to children.
Ofcom said in the most serious cases of non-compliance, it could ask a court to require "payment providers or advertisers to withdraw their services from a platform", or make internet service providers block access to a site in Britain.
X did not immediately reply to a request to comment on the Ofcom investigation.
