Sestak, a former Navy vice admiral, made the announcement at a crowded VFW hall in Folsom in his suburban Philadelphia district, near where he grew up. He scheduled five campaign stops in Pennsylvania on Tuesday and Wednesday.
Standing with his wife, Susan, the second-term Democrat said he wants to put "principles over politics."
"The great American dream is not about getting ahead. It is about doing well ... and creating a world for the next generation in which they are inspired to do the same," Sestak said. "Let's again lead this world by example and not intimidation."
In April, the five-term Specter severed his decades-long ties with the Republican Party. He said, in part, it was to avoid a Republican primary challenge from former Rep. Pat Toomey, who nearly beat him in the 2004 primary.
Sestak, 57, faces an uphill battle in challenging the White House-backed Specter, who has millions more in the bank. But Sestak enters the race with enough money to get off to a competitive start and he has the potential to give Specter, 79, a serious run.
Much of Sestak's organizational and financial support could likely come from those in the liberal wing of the Democratic Party who have been slow to embrace Specter.
Sestak's announcement had been expected. He has been campaigning and already visited each of the state's 67 counties.
Specter's campaign manager, Christopher Nicholas, on Tuesday denounced Sestak's "taxpayer-financed self-promotion tour around the state" and criticized the congressman for missing 105 House votes this year.
Specter has the advantage of backing from much of the party establishment. President Barack Obama and Gov. Ed Rendell, both Democrats, have pledged support. On Monday, his campaign released the names of more than a hundred party leaders who have endorsed him.
Recently, he voted against letting people carry hidden guns in 48 states if they have a concealed weapon permit in any of those states. The vote was viewed as an example of him attempting to appeal to party liberals.
A recent Quinnipiac University poll showed Specter and Toomey in a close race, while Specter had a significant lead over Sestak.
Toomey's campaign issued a statement Tuesday welcoming Sestak to the race and calling him "a consistent liberal who really believes in his values," as compared to Specter, "a career political opportunist who believes in nothing but his own re-election."
Sestak graduated from the U.S. Naval Academy and commanded an aircraft carrier battle group during post 9/11-operations in Afghanistan. He has graduate degrees from Harvard University and served as director for Defense Policy on the National Security Council during the Clinton administration.
After more than 30 years in the Navy, he returned to Pennsylvania to run for office. In 2006, he defeated GOP Rep. Curt Weldon, who spent two decades representing what had historically been a Republican district. He won re-election in 2008 with 60 percent of the vote.
Sestak has $4.3 million in cash, while Specter has $7.6 million, according to the candidates' latest reports filed with the Federal Election Commission.