"We must offer positive campaigns of substance and then let the voters decide," Sununu said at a news conference.
The announcement ended months of speculation that the three-term congressman would challenge Smith. Sununu is the son of former Gov. John H. Sununu, who served as White House chief of staff under former President Bush.
Democratic state Sen. Lou D'Allesandro said a Smith-Sununu faceoff would be "a real, take-your-gloves-off, come-out-swinging, very expensive primary."
The primary is set for next September. The race has national implications for control of the Senate, where Democrats hold a 50-49 advantage.
Democrats see a bitter GOP primary as a plus for Democratic Gov. Jeanne Shaheen, who is expected to run for the seat.
Smith supporters would rather have Sununu stay in the House. "It forebodes ill will, an injured Republican Party," said former Republican state Sen. Jim Rubens.
Sununu, 37, was urged to run by some state and national Republicans who do not think Smith can beat Shaheen. Smith, 60, also angered some Republicans when he left the GOP briefly in 1999 to run for president as an independent. He delivered a stinging attack on the party from the Senate floor.
Both Sununu and Smith are social and fiscal conservatives. They oppose abortion, support more defense spending, and stood with President Bush on tax cuts. One of their few disagreements is over proposed oil drilling in the Arctic National Wildlife Refuge in Alaska. Sununu favors it; Smith opposes it.
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