His support adds much-needed prestige to the Dean campaign, a liberal who was virtually unknown to the US public just a year ago.
A 55-year-old former doctor whose main political experience was as governor of Vermont, Dean is one of nine candidates for the Democratic leadership.
He has strongly opposed the Iraq war and has also taken up many of the populist pro-labour causes that Gore has supported.
"Howard Dean really is the only candidate who has been able to inspire at the grassroots level all over this country the kind of passion and enthusiasm … we need in this country," Gore said at a poltical rally in New York's Harlem district on Tuesday.
"What is going on in this Bush White House today is bad for our country," Gore said. "We don't have the luxury of fighting among ourselves to the point where we seriously damage our ability to win on behalf of the American people this time around."
Dean reaffirmed his main campaign cry, that next November's election will be about "jobs in America again; about investing. Instead of giving three trillion worth of tax cuts to the top one percent of Americans.
"It's about mass transit and schools and investing in roads and bridges and renewable energy and broadband telecommunications so we can eliminate the digital divide and have jobs all over America."
"What is going on in this Bush White House today is bad for our country"
former US vice president
In 2000, Gore lost to Bush in one of the most disputed elections in US history. He considered running again, but announced one year ago that he was staying away from the battle.
Gore's decision will be a blow to many of the other eight Democrats standing for the nomination, particularly Senator Joseph Lieberman - who was Gore's running mate in 2000.
Lieberman's camp was stunned to hear of Gore's decision, which was leaked to the media on Monday night.
"I was caught completely off guard - no notice," Lieberman told NBC's Today programme on Tuesday, ahead of Gore's formal announcement.
He added: "Al Gore is endorsing somebody who has taken positions in this campaign that are diametrically opposite to what Al himself has said he believed in over the years."