The movement hopes to become a political force
The change of name, adopted by a recent party congress, comes two years after the PKK announced it was ending its armed struggle.
However, Tuesday's move was immediately denounced as cosmetic by the Ankara government.
Correspondents say the name change is widely seen as an attempt by the PKK to distance itself from its violent past in an effort to circumvent the ban on its activities and be accepted as a legal party inside Turkey.
The PKK has been outlawed in Britain, France, Germany and Turkey, and branded as "terrorist" by Ankara and Washington.
'Democracy and Freedom'
"The PKK has accomplished its mission and ceased all its activities," spokesman Riza Erdogan told a news conference in Brussels on Tuesday.
The new group's aim, he said, was: "Democracy for Turkey and freedom for the Kurds. Federalism for Iraq and freedom for the Kurds. Democracy for Iran and freedom for the Kurds."
A statement from KADEK leaders also denounced terrorism.
But the move was rejected by Turkish Foreign Minister Ismail Cem.
"We don't believe a change of name brings about a change of nature or essence," he said.
Asked what it would have to do to acquire political legitimacy, he replied: "I do not give much consideration to the question of how terrorist organisations might change."
The new group will be led by the imprisoned PKK leader, Abdullah Ocalan.
He was condemned to death for treason in June 1999, but the Turkish Government suspended execution pending a ruling by the European Court of Human Rights.
Following his arrest and appeals for peace, the PKK announced in September 1999 it was ending its armed struggle for self-rule in south-eastern Turkey.
Heavy fighting in the region has significantly diminished since then. However Turkey, which has downplayed the peace efforts, continues to hunt down activists.
The European Union has demanded that Ankara grant its 12 million strong Kurdish minority more rights if Turkey is to become a member state.