The council will encourage defections within the Iraqi army and also ensure that a democratic government takes control when the current regime is ousted, said the group's spokesman, Major General Tawfiq al-Yassiri.
The election of the council came at the end of a three-day meeting in London, which also included Iraqi political and religious representatives.
Similar meetings are being held in other capital cities as Iraqi opposition groups capitalise on US President George W Bush's commitment to depose Saddam Hussein.
Among those attending the London meeting was Prince Hassan of Jordan.
The Jordanian Government stressed that his participation was a personal initiative and did not reflect the kingdom's official position.
Factions represented
Major al-Yassiri - a naval officer who was wounded in an uprising in southern Iraq in 1991 - said that all Iraq's ethnic and religious groups were included in the new council.
"We made sure that the military council will represent all the different factions which are present in the Iraqi army," he said.
Major al-Yassiri said officials from the US State Department, the White House and the Pentagon had attended the first day of the conference and welcomed any support from what he called international "friends" of the Iraqi people.
He said that disaffection in the Iraqi army is increasing and defections would play a part in removing Saddam from office.
"We believe that the process of change will take place from inside and the Iraqi army will have a major role."
Major al-Yassiri, who fled to Saudi Arabia and now lives in London, is an ally of Dr Ahmad Chalabi, the head of the Iraqi National Congress umbrella group which supported the meeting.
Other members of the military council include Major General Najib al-Salhi, who led a mechanised division of the army, and Major General Saad Obeidi, who was in charge of psychological warfare under Saddam's rule before defecting in 1986.
Major Salhi told Reuters news agency that the US must declare it is only after Saddam Hussein and not his troops, otherwise it would not have support of the Iraqi people or the army.
US pressure
President Bush vowed last week to use "all tools" to oust Saddam Hussein, whom he accuses of trying to build weapons of mass destruction.
Speculation has been mounting that America has plans to strike Iraq after its refusal to allow UN weapons inspectors back into the country.
However, a military campaign against Iraq is not supported by other nations in the region.
Oman, Qatar and the United Arab Emirates have even signed free-trade agreements with Baghdad.
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