The former U.S. Treasury official oversaw the nation's bank bailout at the height of the recession.
Kashkari says his motives for running are the relatively poor performance of California's public school system, the state's unemployment and poverty rate. He says his campaign will focus on boosting jobs and improving public schools.
California's schools rank 46th in test performance, he said, while nearly a quarter of the state's 38 million residents live in poverty.
"The status quo is unacceptable," he said. "Don't let the defenders of the status quo get away with it," said Kashkari.
California has added about 226,000 jobs during the past year, second only to Texas, and the unemployment rate has steadily declned since the end of the recession. It now stands at 8.5 percent, while the national rate is 7 percent.
He joins Republican Assemblyman Tim Donnelly as declared major candidates in the race against incumbent Jerry Brown.
Brown has not yet declared his intention to run for re-election but has amassed $17 million in his campaign account.
Moderate Republican and former lawmaker Lt. Gov Abel Maldonado dropped out of the race last week.
Kashkari describes himself as a social moderate who supports gay marriage and abortion rights - positions that could be advantageous in overwhelmingly Democratic California. Republicans now make up less than 30 percent of the electorate in the state.
The official filing period to run for governor does not begin until Feb. 10.
The Associated Press contributed to this report.