Saturday saw Russia's biggest demonstration in many years by protesters calling for fresh parliamentary polls over vote fraud.
Mr Putin's party United Russia barely scraped a majority in the elections held earlier this month.
"I have made the most serious decision of my life. I am running for president," Mr Prokhorov said at a news conference.
Earlier this year, the metals billionaire and owner of the US NBA New Jersey Nets basketball team made a short-lived effort to challenge the United Russia party in this month's parliamentary elections.
He later resigned from his own party following an internal power struggle that he blamed on the Kremlin.
Mr Prokhorov is ranked by Forbes as Russia's third richest man with a fortune of around $18bn (£11bn; $13bn euros).