Veteran MP and former minister Michael Meacher has launched a challenge to Gordon Brown for the Labour leadership, promising a left-wing agenda.
Mr Meacher said there should be a debate on Labour's future direction
He called for Trident nuclear weapons to be scrapped, huge investment in renewable energy, curbs on City bonuses and nationalisation of the railways.
He claims to have enough MPs' support to get onto the ballot and insists he has a chance of winning.
Fellow left-wing leadership contender John McDonnell said he would fight on.
"We have been expecting Michael's announcement for over nine months. It doesn't change things," said Mr McDonnell, who began his campaign last July.
There is also speculation Mr Meacher's challenge will flush out a Blairite leadership contender from the Cabinet ranks.
Mr Meacher is one of Labour's longest-serving MPs, having had ministerial jobs in the Wilson and Callaghan governments of the 1970s.
Since being sacked as an environment minister in 2003, he has been a vocal critic of the government, particularly on its environment policy.
The Oldham West and Royton MP was flanked by Ian Gibson and Kelvin Hopkins, two prominent backbenchers from the Labour left, as he launched what he said was a "centre-left" bid for the leadership.
He said Labour members deserved a say in the party's future direction and insisted it was not a "foregone conclusion" that Gordon Brown would be the next prime minister.
He called for a new direction on foreign policy, which he said should be "based on fundamental British interests, not subservience to the US".
He added: "It is not sustainable to continue as America's glove puppet."
He also called for the renationalisation of the railways, a "profound change" in our way of life to combat climate change, and he said the national minimum wage should be raised to £7 an hour.
He also hit back at criticism from Mr McDonnell over his support for the 2003 invasion of Iraq.
"The biggest political mistake of my life was over the Iraq war. I believed the prime minister when he said there was a growing and imminent threat," said Mr Meacher.
He said some of Mr Blair's comments in the run up to war "stretched the truth".
Mr Meacher's campaign claims to have the backing of "about 30" Labour MPs, although he said he was not prepared to name them at this stage.
Leadership candidates need 45 signatures from Labour MPs to get on to the ballot.
But Labour MP Stephen Pound, who described Mr Meacher as a "faintly ridiculous" figure, said he would be surprised if the veteran left-winger managed to get the required support.
The chancellor is the favourite to succeed Mr Blair
"It's a pity because, frankly, he's going to get humiliated," said the Ealing North MP.
"I suspect he knows that, if he put his ego to one side a bit he would realise that."
BBC political editor Nick Robinson said some Labour MPs would welcome a contest and Gordon Brown himself might prefer a contest to a "coronation", as it would give his leadership more of a mandate.
But asked whether a contest would be in the best interests of the Labour Party on Thursday, Mr Brown replied: "That's up to other people".
He welcomed any debate about the future of the party and said: "The key thing is making our country great in the future by making the right decisions now."
Mr McDonnell, who will be competing with Mr Meacher for left-wing Labour backing, said he had the support of about 22 MPs, and would not drop out of the race.
He said Labour members would judge the candidates on their records, and while he had voted against tuition fees, the Iraq war, privatisation and benefit cuts, Mr Brown and Mr Meacher had consistently voted for them.
"I have asked Michael to come on board with our campaign, but he's chosen to go his own way. Now let's have the debate on policies and the election and let the members decide," he said.
Asked whether his challenge might split the left and leave neither able to take on the chancellor, Mr Meacher said he did not think Mr McDonnell could get the necessary number of nominations.
"I firmly believe that I can, and to that extent, I am putting the left into the ring and I think and hope I am uniting the left rather than splitting it."