"The pivotal elections in 2012 are going to determine the trajectory of our country, whether the opportunity to achieve the American dream will continue to decline, or begin to ascend again,'' Allen said in a video to supporters. "Friends, it's time for an American comeback."
But Allen, 58, who served four years as governor and six years as senator, was immediately criticized by potential Republican opponents as a moderate senator who is partly to blame for the record spending and ballooning deficit in Washington.
"George Allen says he's for limited government, but this guy was one of the biggest government guys out there,'' said Corey A. Stewart (R-At Large), chairman of the Prince William County Board of Supervisors. "He's part of the problem.''
Jamie Radtke, chairwoman of the Virginia Tea Party Patriots Federation and the only other Republican officially in the race, said Allen needs to explain his record on spending, gun rights and abortion.
"Senator Allen was part of the Washington establishment, and he still is,'' said Radtke, who briefly worked for Allen after college. "If we want to change Washington, we need to change the people in Washington and elect a new generation of strong leadership to the Senate who will make principled decisions.''
Allen faces a tough primary fight for the Republican nomination and a chance to run against Webb, the Democrat who beat him by less than 10,000 votes. In that race, Allen became surrounded by controversy after he used the word "macaca" - a term thought to mean a monkey and viewed by many as a racial slur - in reference to a young Indian American volunteer for Webb.
Webb said through a spokesman Monday that he would announce a decision in the first quarter of this year after careful consideration and discussion with his family.
"Senator Webb came to the Senate with a commitment to restoring the principles of economic fairness and good governance,'' Webb spokesman Will Jenkins said. "Right now, he remains focused on working with senators from both parties to address the nation's greatest challenges - as he has since his first day in office."
Mark Rozell, a political scientist at George Mason University, said Allen, who has been a hero to conservatives, is in the unusual position of having to fight for votes on the right. If he wins the primary, Rozell said, he will have to do something he is less comfortable with - try to appeal to a broader audience that will want him to show how he has changed since the macaca incident.
Allen announced his candidacy to supporters through an e-mail and online video and filed his candidacy papers with the Federal Election Commission so he can begin raising money. But he will not launch his campaign publicly until later this year.
He said in an interview Monday that criticism about his conservative credentials are disappointing. While he was in the Senate, he said, he voted against the infamous "bridge to nowhere" in Alaska, which became a symbol of the broken earmarks system in Washington, supported states' rights and introduced a constitutional amendment to balance the budget.
"It's disappointing,'' he said. "Nothing is more incorrect. I've always been anti-establishment."
In recent weeks, Allen has been callingRepublican legislators and business leaders across the state to shore up support for his candidacy. He has been hiring staff and lining up consultants, and expects to move into his campaign headquarters in Richmond in the next month.
On Monday, House of Delegates Speaker William J. Howell (R-Stafford) said through a spokesman that he would support Allen because he is a "true conservative leader."
Last month, Radtke became the first Republican to enter the race.
Two others have expressed interested in running: Del. Robert G. Marshall (R-Prince William) and Bert Mizusawa, a businessman and lawyer who ran against U.S. Rep. Scott Rigell. Marshall and Mizusawa could not be reached Monday.