Meanwhile, Islamic militant group Hamas announced it will boycott the Jan. 9 election, the first sign of tensions with the interim Palestinian leadership since Arafat died in Paris hospital on Nov. 11.
Barghouti, who is running as an independent since the ruling Fatah movement nominated Mahmoud Abbas, will likely split the Fatah vote. Barghouti is more popular among younger Fatah members than the staid Abbas.
His campaign dashes the expectations of an almost certain victory by Abbas, whose challengers until this point were fringe figures, according to Reuters.
Barghouti's wife Fadwa, who had met with her husband on Wednesday, filed the papers for her husband's candidacy to the Central Election Commission in Ramallah. Barghouti's campaign paid the $3,000 required from independent candidates, said Saed Nimr, head of a group advocating freeing Barghouti from jail, reported the Associated Press.
The 45-year-old leader, who initially said he would not run, is serving five consecutive life terms for his role in deadly shootings of four Israelis and a Greek monk. Barghouti has denied involvement in violence.
A Barghouti presidency would likely hamper resumption of the peace process. He favors a negotiated settlement, but has praised armed confrontation with the Israeli army, according to the AP.
Word of Barghouti's candidacy came just hours after Abbas formally launched his campaign. Abbas is calling for a renewal of peace talks with Israel.
"We must have a dialogue with the Israelis," he said at his campaign headquarters. "After the elections, we will meet again" to discuss the so-called road map to peace.
The internationally backed peace plan calls for creation of an independent state next year, but has been stalled since it was signed in June 2003. The Palestinians Authority has failed to stop attacks by militant groups like Hamas and Islamic Jihad, while Israelis have failed to halt settlement construction and remove settlement outposts.
Israel's government has endorsed a deal to begin withdrawing from the Gaza Strip in July.