Andrew Little will go up against David Cunliffe and Grant Robertson to contest Labour's leadership.
Mr Little confirmed this morning he would stand, after signalling over the weekend that he was thinking about it.
In a statement he said his background as head of the EPMU and former Labour Party president showed he had the required skills to drive through change and lift performance.
"There are three immediate issues to deal with: creating greater cohesion across the caucus, rebuilding the relationship between caucus and the Party and, most importantly getting the process under way to listen to the voters who have abandoned us."
Mr Little's union background could work in his favour with the affiliated unions getting 20 per cent of the vote.
Nominations for the leadership contest close next Tuesday. Others including David Parker and David Shearer are still weighing up their options.
Mr Little was the head of Labour's largest affiliated union, the EPMU, for many years before becoming an MP in 2011.
That background gives him strong links in the party and he is not seen as belonging to any of the personality factions in caucus, which could also help him secure the votes of MPs not totally satisfied with Mr Robertson or Mr Cunliffe.
He lives in Wellington but has stood in his childhood home of New Plymouth for the past two elections - a seat won convincingly by National's Jonathan Young.
Mr Little was last MP to get into Parliament on Labour's list and said soon after the election that he acknowledged his defeat in New Plymouth could mean he did not have the mandate to lead.
Mr Parker, Labour's acting leader, said it was good there was another contestant in the race - but remained coy on whether he was likely to change his mind and put his name in as well. Asked if he expected any other candidates to come forward he said "I suppose we'll know by next Tuesday when nominations close."
Mr Parker has said he did not intend to contest the leadership, but his supporters remain expectant he will put his name up for the job. Today Mr Parker said he had not yet changed his position. He would not answer when asked whether he was likely to change his mind or whether Mr Little's entry made him less or more likely to contest it himself.
David Cunliffe and Grant Robertson are yet to give their reaction to Mr Little's decision.
MPs spoken to said Mr Little could pick up the support from those MPs who did not believe it was viable for Mr Cunliffe to stay on given the election result and the rift in caucus.
There were also those who were wary that Mr Robertson could put off some voters because he was perceived as Wellington-centric, and because some of the more conservative voters were concerned about his sexuality.