At a fund-raiser Thursday that grossed about $1 million, McCain, 66, said he decided after his unsuccessful 2000 presidential bid he didn't want to be remembered as someone who stayed in office too long.
But as the country struggled in the wake of the terrorist attacks of Sept. 11, 2001, McCain said he decided he was up for the challenge.
"It sounds a little egotistical for me to say that therefore I'm going to run, but I do believe I can continue to serve and to be able to help Arizona and the nation," McCain told a crowd of about 600 supporters.
The announcement appears to rule out a 2004 presidential run for McCain, who bowed out of the 2000 race after a competitive battle with George W. Bush.
State Democratic Chairman Jim Pederson said it's too early to say who would face McCain in a Senate race, but noted McCain is as popular with Democrats as he is with Republicans.
"It will be an uphill battle for a Democratic candidate," Pederson said.
As chairman of the Senate Commerce Committee, McCain will lead investigations into the disintegration of the space shuttle Columbia, restructuring of the scandal-plagued U.S. Olympic Committee, and setting policy on a broad array of telecommunication issues.
He also remains a driving force behind the patient's bill of rights and military reform.
McCain was first elected in 1982 to the House of Representatives, where he served two terms. He was elected to the Senate in 1986 and was re-elected to a third term in November 1998.
McCain would be 74 in 2011 if he serves out a fourth term. He has had three cancerous lesions removed, in 1993, 2000 and then last year.