Clinton made the announcement on Sunday in a video published on her website, saying "the deck is still stacked in favour of those at the top" as she sought to highlight the theme of ecoonomic inequality.
It is the second time that Clinton has run for presidency.
On Saturday, President Barack Obama, who defeated her in the 2008 Democratic nomination, said Clinton "would be an excellent president".
"She was an outstanding secretary of state. She is my friend. I think she would be an excellent president," Obama said from Panama, where he attended the Summit of the Americas and held a historic meeting with the Cuban leader Raul Castro.
With her candidacy, Clinton also makes history as the first ever spouse of an American president to seek the highest elective office in the US.
In her statement, Clinton, a Democrat, also promised to work across party lines and reach out to Republicans, who currently control the US Congress.
But during her husband’s presidency from 1993 to 2001, both Clintons repeatedly clashed with the Republicans, who tried to remove the 42nd president from office. She became a lightning-rod of Republican criticism, from her handling of the Clinton administration’s failed health care reform to the investigations into their private lives.
$2.5bn campaign
Although a native of Chicago, Clinton has set up her campaign headquarters in New York, where she served as senator after her husband left office.
Clinton is expected to make her first campaign stop in the US state of Iowa, which will hold the first nominating process in early 2016.
Clinton is not the only high-profile US politician in the running for president. Former Florida Governor Jeb Bush, son of the 41st US President George HW Bush and brother of another former president, George W Bush is also expected to declare his candidacy for the Republican Party.
Not long after Clinton announced her bid on Sunday night, Bush responded on Twitter, saying: "We must do better than Hillary".
That sets up a potential Clinton-Bush match-up and a repeat of the 1992 elections, when the elderly President Bush lost to Bill Clinton, then a governor of the small southern US state of Arkansas.
According to a New York Times report, Clinton and her allies are trying to raise as much as $2.5bn to finance her campaign. The eventual Republican candidate is also expected to match that amount.
In anticipation of her announcement, the Republican Party posted on its website a 31-second video questioning Clinton's candidacy, from her role in the deadly US consulate attack in Benghazi to her decision to delete a large cache of emails from her time as the US top diplomat.
While Clinton tries to steer her campaign mostly on domestic issues, it is likely that her foreign policy record as the secretary of state during Obama's first four years, would be put under scrutiny.
In an interview with Al Jazeera, Ibrahim Sharqieh, foreign policy fellow at Brookings Doha Center, said that as secretary of state, Clinton "lacked serious commitment" in resolving many of the issues affecting the Middle East, particularly the ongoing Palestinian-Israeli conflict.
Given her record, Sharqieh said that he is "not very optimistic that she is going to make a difference on US foreign policy towards the Middle East".
He said that Clinton "failed miserably" in putting pressure on Israel and the Netanyahu government to address the Palestine issue.
However, he said that he expects Clinton to be more "hawkish" than President Obama, whom he called as "the most passive American president in decades" on Middle East issues.
Source: Al Jazeera
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