Ranariddh, son of the beloved late monarch Norodom Sihanouk and half-brother of the current king, said he was making a comeback to unite the royalist movement and has denied any alliance with Hun Sen.
But many observers believe it is a tactic by the Cambodian leader to harness the popularity of the royal family and draw support away from the opposition Cambodia National Rescue Party (CNRP), which made gains in elections last July.
"My only hope is to have a voice in the parliament in order to serve the nation and to resolve national problems," the prince, who was prime minister from 1993 to 1997, told a meeting of supporters in the capital Phnom Penh.
"My objective is to reunite the people as the root of the party," he said, adding that those he referred to were royalists who supported his father, who died in 2012.
However, he did not dismiss the possibility of some kind of alliance.
"I will not hesitate to form an alliance with a party that would be with me to take care of the supreme interests of the country," he said.
Ranariddh said he would register his new Community of the Royalist People Party with the interior ministry next week.
Hun Sen ousted Ranariddh in a bloody coup in 1997, but their relationship has improved in recent years.
While not as revered as his father, Ranariddh is a popular royal figure.
He has political gravitas, although his reputation has been battered in recent years by allegations of corruption and adultery which have diminished him in the eyes of some royalists.
He was pardoned in 2008 over a conviction for fraud which saw him ejected from the royalist Funcinpec party founded by his father.
He twice entered politics after 2008 under the banner of his own Norodom Ranariddh Party, but both forays were shortlived.
Ranariddh stepped down from politics voluntarily in 2012, with senior officials in the two royalist parties seeing him as a divisive figure.
The royalists failed to win a single seat in last year's elections.
The CNRP has boycotted parliament since the polls last year, accusing Hun Sen of vote-rigging.
He has also faced mounting criticism over his rights record as well as accusations of using excessive force to disperse demonstrators.
The 61-year-old former Khmer Rouge cadre, who defected and oversaw Cambodia's rise from the ashes of war, has ruled for 28 years and vowed to continue until he is 74.