In a statement, the 77-year-old said he was standing "to defeat Donald Trump and rebuild America".
"The stakes could not be higher. We must win this election," Mr Bloomberg wrote.
He joins 17 other candidates vying for the Democratic nomination to take on Mr Trump in 2020.
As things stand, former Vice-President Joe Biden, Senators Elizabeth Warren and Bernie Sanders are the party's front-runners.
Mr Bloomberg is said to be concerned the current field is not strong enough to challenge the president.
He enters the race after months of debate over wealth inequality in the US, with Mr Sanders and Ms Warren announcing plans for steep tax rises for billionaires. Unveiling his tax proposals in September, Mr Sanders said: "Billionaires should not exist."
President Trump taunted Mr Bloomberg earlier in November, saying there was "nobody I'd rather run against than little Michael".
The same day, Mr Bloomberg filed paperwork for the Democratic primary election in Alabama.
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