Sanders, 77, made the announcement in a radio interview in his home state of Vermont on Tuesday.
“We began the political revolution in the 2016 campaign, and now it’s time to move that revolution forward,” the self-described Democratic socialist told Vermont Public Radio.
Sanders said he would enact many of the ideas he championed during his bid for the presidency in 2016, including universal healthcare access and the minimum hourly wage of $15, if elected to the White House this time around.
A frequent critic of current US President Donald Trump, Sanders went on to describe the Republican leader as “an embrassasment”.
“I think he is a pathological liar… I also think he is a racist, a sexist, a homophobe, a xenophobe, somebody who is gaining cheap political points by trying to pick on minorities, often undocumented immigrants.”
In an email to supporters early on Tuesday, Sanders pledged to build a vast grassroots movement to confront the special interests he said dominate government and politics.
“Our campaign is about transforming our country and creating a government based on the principles of economic, social, racial and environmental justice,” he said.
Sanders raised more than $1m within hours of launching his 2020 presidential bid.
Sanders had launched his 2016 candidacy against former Secretary of State Hillary Clinton as a long shot, but ended up capturing 23 state-nominating contests and pushing the party to the left, generating tension between its establishment and liberal wings that has not entirely abated.
Like Trump, Sanders was an outsider when the 2016 presidential primaries began, but he came close to pulling off an upset over Clinton.
This time around, Sanders has been among the leaders in opinion polls of prospective 2020 candidates, but he faces a field more heavily populated with other liberal progressives touting many of the same ideas he brought into the party mainstream.
A number of other high-profile Democrats are still considering presidential bids, including former Vice President Joe Biden and former Texas representative Beto O’Rourke.
The primaries and caucuses that determine the Democrat nominee for next year’s election will begin in February 2020 in Iowa.
Al Jazeera’s Shihab Rattansi, reporting from Washington, said the already crowded field was down to candidates seeking to “gain some momentum” before Sanders announced his run for office.
“Sanders enters the race now as the frontrunner,” Rattansi said.
“He has the best nationwide organisation, the best name recognition and the biggest network of donors around the country – he is the now the man to beat.”
The crowded field could make it harder for Sanders to generate the same level of fervent support as four years ago, however.
The 77-year-old is also likely to face scrutiny about his age and relevance in a party that is increasingly advancing more diverse and fresh voices, including women and minorities – groups that Sanders struggled to win over in 2016.
Some Democrats have questioned whether their champion this time around should be a septuagenarian white man.
The Vermont senator, a former member of the US House of Representatives, also faces different pressures in the #MeToo era.
In the run-up to Sanders’s 2020 announcement, persistent allegations emerged of sexual harassment of women by male staffers during his 2016 campaign. Politico and The New York Times reported several allegations of unwanted sexual advances and pay inequity.
Sanders offered an unequivocal apology over the complaints on January 10, saying: “What they [women] experienced was absolutely unacceptable and certainly not what a progressive campaign – or any campaign – should be about.”
“Every woman in this country who goes to work today or tomorrow has the right to make sure that she is working in an environment which is free of harassment, which is safe and is comfortable, and I will do my best to make that happen.”