Ed Miliband to take on brother David in leader battle
The former energy minister declared his intention in a speech to centre-left think-tank the Fabian Society.
He said the party must renew itself and Labour needed to be "clear and honest" about the scale of its election defeat.
He said he would "absolutely" be ready to serve under David Miliband, should his brother win, and promised the leadership contest would be civilised.
The pair are the only two Labour MPs so far to have announced they are standing for the party leadership, previously held by Gordon Brown.
Ed Miliband, 40, kicked off Saturday's speech by joking that everybody had been asking whose bid their mother would support - then said she was behind the left-wing MP John Cruddas.
Mr Miliband said: "The one advantage of opposition is the chance to renew, to think about the country we live in and the people we seek to represent.
"Fundamentally, we lost touch with the values that made us a progressive force in politics and lost touch with the people we were meant to represent."
He said Labour had to face up to the fact it had "lost trust catastrophically" over the Iraq war and also MPs' expenses.
He added that Labour must not allow itself to be divided.
"We have got to leave the whole Blair/Brown business behind us... [and] move on with a new set of ideas," he said.
Asked how he felt about standing against his brother, the former foreign secretary, Ed Miliband said there would be a "civilised contest".
"David is my best friend in the world. I love him dearly. There is no way I'm going to take lumps out of him either on the record, off-the-record or behind the scenes. It is not my way of doing politics."
Speaking before his brother had confirmed his decision, David Miliband, 44, said he was "absolutely confident" the family could "remain strong" whatever happened.
Ex-Schools Secretary Ed Balls, former Health Secretary Andy Burnham and backbencher Mr Cruddas have all indicated they are considering a bid.
Alan Johnson, Harriet Harman and Jack Straw have ruled themselves out of the race.
Former Work and Pensions Secretary Yvette Cooper has also decided against standing, saying she wanted to spend more time with her children.
She told BBC Radio 4's Today programme: "I could be working for another 25 years. I'm only going to be reading bedtime stories to my children for another two or three years."
However, she said she hoped other women would put themselves forward.
"We need to have more women in senior politics."
Mr Balls, her husband, said he had offered to support his wife had she decided to stand.
He told the BBC he would speak to people in his Morley and Outwood constituency before deciding whether to stand.
"It's really important that we listen to voters before we reach conclusions. If we need to change policy, it must be because voters are saying to us we didn't get it all right."
Of the Miliband brothers, he said: "Both of them would do a brilliant job, if elected."
BBC political correspondent Ross Hawkins said Ed Miliband's speech contained a few surprises.
"It was full of criticisms of the last Labour government in which Ed Miliband was a minister and, in effect, of the manifesto which he pulled together," he said.
He added that Ed Miliband had taken a "strategic decision" to be "very openly critical of what Labour did in office", despite having served in the party's last cabinet.
His brother, a former protege of ex-Labour leader Tony Blair, has said he wants to rebuild the Labour Party as "the great reforming champion of social and economic change in this country".
David Miliband said Labour had to acknowledge that it had "lost this election and lost it badly" and now had to "re-engage with the public and understand, especially in England, why we lost".
When asked earlier in the week about speculation Ed would enter the race, he said: "We have talked very frankly and openly to each other because we love each other as brothers."
He added: "Brotherly love will survive because brotherly love is more important than politics."
Ed Miliband is less well-known than David and has been an MP for a shorter time, but he has the backing of trade union Unite and is known to have supporters in the Parliamentary Labour Party.
David Miliband has already been backed by a number of Labour heavyweights including former home secretary Alan Johnson.