Vince Cable will step down as the leader of the Liberal Democrats on July 23.
Sir Vince said it was time for a "new generation" at the top of the party but pointed to expected gains at the European elections as a sign that "we are in an excellent position" to lead a centre-ground movement in British politics.
Deputy leader Jo Swinson is firm favourite to succeed Sir Vince, who announced the start of the contest in an email to party members.
On Friday, the Liberal Democrats opened nominations to replace Sir Vince Cable as party leader.
Nominations will close on June 7, with the announcement of a new leader on July 23.
In an email to members, Sir Vince said: "There are major challenges ahead. One is to win, finally, the battle to stop Brexit.
“Our campaigning has given hope; now we need to secure a referendum in Parliament, and then win it.
"Another is the opportunity created by the conflict and decay within the two main parties to build a powerful, liberal, green, and social democratic force in the centre ground of British politics. We are now in an excellent position to lead such a movement."
The party only has 11 MPs and the leadership rules require any candidate to have the support of 10 per cent of their colleagues in the Commons and 200 members spread across at least 20 local parties.