Prince Talal Mohammad al-Rashid is son of the last ruler of the independent Rashidi emirate, which reigned in the northwestern region of Hail from 1835 to 1921.
He said on Tuesday: "We announce the birth of the Saudi Democratic Opposition Front, which will struggle by peaceful means for the establishment of democracy in the country."
"The Al-Saud (family ruling Saudi Arabia) must either respect liberties and introduce democracy or give up the power they usurped," Prince Talal, who has been living in exile in France since 1980, told AFP.
Talal, son of Mohammad II bin Talal al-Rashid, said his opposition group would launch a satellite television channel within three months which will broadcast from a European country to "call on Saudis to rise up against the tyrants and usurpers plundering public funds".
The Rashidi emirs, who were ousted by the Al-Saud family during its struggle to unite Saudi Arabia, are a branch of the Shammar tribal confederation.
Prince Talal, who has retained his title, said that the confederation was backing his new movement.
He said his group, with "some 2,000 active members, mostly in Saudi Arabia", would co-ordinate its activities with other opponents of the Saudi government at home and abroad, chiefly the London-based Movement for Islamic Reform in Arabia (MIRA), which calls for a regime change in the kingdom.
Members of the Shammar confederation are believed to number "hundreds of thousands living mainly in Saudi Arabia, Iraq and Syria but also in Kuwait, Qatar and the United Arab Emirates", said Talal's daughter, Madhawi al-Rashid, a London-based academic.