The announcement ends two decades of speculation over the entry of the actor, who enjoys cult status in Tamil cinema, in the political arena.
"I am joining politics and it is for sure," said the actor clad in a spotless white kurta and sporting a grey beard, amid thunderous applause from fans.
Batting for honesty in politics and good governance, he said, "everything needs to be changed" and declared that "spiritual politics" needs to be ushered in, sans shades of any caste or religion with transparency.
During the era of kings, they plundered the countries of their enemies. However, in democracy, parties were plundering their own people and such a "system" needs to be changed democratically.
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Dramatically, he asked for "volunteers," not cadres to see to it that those who prevent amenities and rights reaching the people are thwarted.
Asserting that he will not tolerate nepotism or under the table dealings, he said, "I want volunteers who will keep vigil and who will not go to any officials, ministers or MPs, or MLAs for selfish needs."
"I am only a representative of the people to monitor such vigilantes."
He said such a force of selfless volunteers who will act as not cadres but as 'vigilantes' was needed and it should be built.
The actor said the first task would be streamlining the existing registered and unregistered fan clubs across the State.
He appealed to his fans to bring all sections of people into the club so that it could transform into a party and "till then there is no need to indulge in political talk which includes me."
The actor's remark is seen as a reference to the bitter infighting in the ruling AIADMK, allegations of rampant corruption, perceived political instability, and also the tax raids held at premises in the State including those linked to the ruling establishment, notably a Minister and his associates.
The RK Nagar Assembly bypoll in April was also cancelled following allegations of money distribution.
Stressing that he knew that launching a party, capturing power and governing was not an "ordinary thing," he said it was akin to extracting pearl from sea.
"This was possible only with the blessings of the God and full support of people," he said and expressed confidence that he will get both of it.
Quoting a shloka from Bhagawad Gita, which stresses the importance of doing one's duty and leaving the result to the Lord, he said "this is the compulsion of time."
Months after his long-time friend and fellow actor Kamal Haasan gave a clear indication of his political entry, Rajinikanth said he will launch a political party, which will contest all the 234 Assembly constituencies in Tamil Nadu.
Addressing his fans here on the valedictory of a six day long photo-session meet, he said contesting the local body polls was not possible in view of the short time.
"If hankering for power comes to me now am I not a fool?" he said and added it will also not suit his stature of a spiritually-oriented person.
In 1996, the actor had voiced his opposition against Jayalalithaa.
He said the party will be launched ahead of the Assembly elections at an appropriate time.
He said truthfulness, hard work and growth will be the slogan of his party.
"Do good, speak and only good will happen," will be a guiding slogan, he said.
Praising his fans for their "discipline" he said anything could be achieved with it.
Asking if there has been too much of a waiting game, and speculation on if he will enter politics or not, he said with a laughter that he was not afraid of joining politics.
In a tweet in Tamil, Kamal Haasan welcomed his fellow actor's political entry.