Kevin Rudd says he will stand against Australian Prime Minister Julia Gillard in a leadership ballot next week.
Mr Rudd announced the much-expected decision in front of a large media contingent in Brisbane on Friday afternoon.
Mr Rudd, who was ousted by Ms Gillard in a coup in June 2010, said he is the best person to lead the governing Australian Labor Party (ALP) into the next election in 2013.
"Rightly or wrongly, Julia has lost the trust of the Australian people and, starting on Monday, I want to start restoring that trust.
"That's why I've decided to contest the leadership of the Australian Labor Party at the ballot and the caucus of the party on Monday," he said.
"I want to finish the job the Australian people elected me to do when I was elected by them to become prime minister."
On Wednesday, Mr Rudd announced that he would stand down as Foreign Minister while on a trip to the United States, saying he no longer felt he had the support of Ms Gillard.
Kevin Rudd believes he is the party's only hope of defeating the opposition Liberal Party and its leader Tony Abbott at the election.
Mr Rudd says Mr Abbott would undo the accomplishments of the ALP, including its successful management of the economy during the global financial crisis.
Opinion polls show Mr Rudd remains more popular with voters, and on Friday he appealed to Australians to phone their local ALP member or senator to voice their views on who should be leader.
But Julia Gillard says she is confident she has the support of her Caucus colleagues to defeat Mr Rudd.
Ms Gillard says she has the character, strength and temperament to continue as the Labor Party leader.
"What Kevin obviously struggled to do when times were a little bit politically tough, particularly in 2010, was to run a government with any sort of method or purpose or discipline, internal processes, ability to get things done - that's what I have sought to rectify as prime minister."
Earlier, Australian Treasurer Wayne Swan renewed his demand for Kevin Rudd to promise that if he loses the leadership ballot he will give up his campaign.