Putin's announcement was greeted by a standing ovation on Saturday at a congress of his ruling United Russia party.
He and President Dmitry Medvedev have ruled in a power 'tandem' since Putin was forced by the constitution to yield the presidency in 2008 after serving a maximum two consecutive terms.
Putin, 58, accepted a proposal by Medvedev to return as president in the carefully choreographed congress in a Moscow sports stadium.
Over 11 years in power, Putin has cultivated the image of a vigorous leader and been filmed riding bare-chested on horseback, scuba diving and showing off his judo skills.
His policies - crushing a Chechen separatist rebellion, taming super-rich businessmen and bringing wayward regions to heel - have similarly won him popularity among Russians.
The next president will be elected for six years and the constitution still allows the head of state a maximum of two straight terms - meaning Putin could be in power for another 12 years.
Putin proposed Medvedev, 46, to lead United Russia's list of candidates for a parliamentary election on December 4.
As president from 2000 to 2008, Putin oversaw an economic boom where household incomes improved on the back of a rise in global oil prices, and his tough talking and macho image helped restore Russia's self-confidence on the world stage.