Nouri Maliki has governed Iraq until now heading a Shia-dominated alliance
Iraqi Prime Minister Nouri Maliki has formed a new political bloc to contest January's general election.
The alliance will be called State of Law and will comprise of 40 political parties representing a variety of Iraqi religious sects and ethnic groups.
Mr Maliki has been prime minister since 2006, but in August his Dawa party broke with the Shia-led coalition.
Analysts say the new bloc is unlikely to gain a majority in its own right and might need to join a wider coalition.
"The birth of State of Law represents a historic milestone and development in establishing a modern Iraq built on peaceful, nationalist principles... far from the politics of marginalisation, discrimination and tyranny," Mr Maliki said in a speech in Baghdad's fortified Green Zone.
Iraq's last parliamentary election in 2005 was contested largely along ethnic and sectarian lines.
Shia-led political parties under the banner of the United Iraqi Alliance won 128 of the 275 seats in parliament.
Iraqi politics have recently undergone a major realignment, with the break-up of the UIA and the formation of the Iraqi National Alliance, a pro-Iranian bloc including the Supreme Iraqi Islamic Council and the Sadrist movement.
The Islamic Dawa Party of Mr Maliki spurned calls to join the new bloc, saying it wanted a broader coalition that had a better chance of winning a second term.
The BBC's Hugh Sykes in Baghdad says Mr Maliki is likely to win support from voters who credit him with helping to reduce the intense violence in Baghdad and in Basra, where militias have been driven off the streets.
However, Iraqis in Basra and elsewhere still complain of insufficient improvement of basic services such as electricity and clean water supplies.
Iraq's politicians are seen as corrupt and generally held in contempt, which could affect voter turnout in January, our correspondent says.
Since the peak of sectarian violence and anti-US insurgency in 2006-07, Iraq has witnessed an improvement in security, although recent bombings blamed on Sunni extremists raised doubts about the ability of Iraqi security forces to cope.
The US says it wants to withdraw the last of its 126,000 troops in Iraq by the end of 2011.
Analysts warn of the possibility of further outbreaks of violence as rival political interests jostle for position in national elections, the first in four years.