"I will seriously take part as a candidate for the election," Khatami told an assembled crowd of pro-reform clerics.
Khatami, a reformist himself, led Iran from 1997-2005. After two terms in office, he was succeeded by Mahmoud Ahmadinejad, the hard-line conservative who clashed for four years with former President George W. Bush.
Khatami has faced tough opposition from conservatives, even before his official announcement.
During his eight years in power he was criticized by opponents for abandoning the fundamentals of the Islamic Republic, and by fellow reformists and students for not living up to his promises to bring reforms to the country.
Some of his supporters were disillusioned by his failure to deliver more change while he was in power.
Announcing his candidacy, Khatami asked rhetorically, "Is it possible to remain indifferent to the revolution's fate and shy away from running in the elections?" He has always vowed to adhere faithfully to Iran's Islamic principles and act according to the constitution.
Khatami stressed the need for free and fair elections, saying the fate of Islamic Revolution is at stake.
Mohammad Ali Abtahi, a close aide to Khatami, told CBS News that if voter participation is high they can easily win the elections. He said, however, that it would be a hard-fought race with the current president, who has the state-controlled media at his disposal.
Abtahi said he hoped that, "In spite of all the bad propaganda against Khatami, which has already started, the younger generation and those who wish for improvement in the future will do their best to guarantee Khatami's victory. The election day, this time, will be a turning point for the fate of the Iranian nation."
Among other candidates for the top office; Ayatollah Mehdi Karoubi, a former Speaker of the Parliament, has announced that he will run for the presidency, and a close aide to Iran's president has said Ahmadinejad will stand for a second term in the June balloting.
The most prominent name among likely candidates is former Prime Minister Hussein Mousavi.