At the same time she lambasted the 101-year-old African National Congress (ANC) of Nelson Mandela for corruption and power abuse.
The 65-year-old medical doctor, social anthropologist and former World Bank managing director told a news conference that her party will contest the 2014 national elections.
"Today I announce that I am working with a group of fellow South Africans to form a party political platform that will focus on rekindling hope that building the country of our dreams is possible in our lifetime," she said.
Her party joins several in opposition at a time when South Africa is burdened by a growing chasm between rich and poor, as well as massive unemployment, and increasingly violent protests against job losses, utility shortages and an education and health system in crisis.
Ramphele has what South Africans call "struggle credentials."
She was an anti-apartheid activist and domestic partner of Black Consciousness co-founder Biko, with whom she had a son.
Ramphele spent seven years under house arrest enforced by the white-minority apartheid regime in the 1970s, and she used her expulsion to a remote rural area to start a health programme and empower women through initiatives like growing vegetables.
In 1988 she went to Harvard University as the Carnegie Distinguished International Fellow and wrote a doctorate of philosophy thesis based on her research at hostels.
She later wrote a book about life in the migrant labour hostels.
Ramphele has received numerous honorary degrees from around the world and is an honorary member of the Alpha and Iota chapters of Phi Beta Kappa at Radcliffe College and Harvard University in the United States.
But analysts say they don't know what she will bring to the table, noting that her criticisms of the ANC are not much different from those of several other opposition leaders, that she has no grass-roots support and is not well-known even in cities.
She resigned from the latter last week however.
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- South Africa