The party is being formed with Mr Yadav as its "mentor", Arun Srivastava, a leader of the rebel group, told reporters in New Delhi.
The foundation convention will be held at Talkatora Stadium, where around 8,000 members of the LJD are expected to converge on the day, Mr Srivastava added.
Yadavji will be present on the occasion besides other senior leaders like (currently independent) MP Veerendra Kumar. The party aims to introduce a new kind of politics, he said.
Mr Srivastava said the LJD is being floated as the matter relating to which is the original JD(U) is pending before court. After the Nitish Kumar-headed JD(U) decided to switch to the NDA fold last year, a faction of the party had opposed the move.
The faction had approached the Election Commission, contending it was the real JD(U) and not the one led by Mr Kumar .
He said Mr Yadav has already been making efforts to bring non-BJP parties on a common platform through his Preserve Composite Culture' campaign.
Mr Srivastava added that the decision whether Yadav and other senior leaders with join the LJD or not will be taken based on the court case verdict.
He said that the LJD, with former Rajasthan minister Fateh Singh as the president, will pay special attention to issues concerning farmers, workers, weaker and marginalised sections, the youth and women.
The LJD intends to introduce electoral reforms "to rid politics of the influence of money, muscle and mafia". The party will follow the path shown by iconic leaders like Mahatma Gandhi, Ram Manohar Lohia, BR Ambedkar, Jai Prakash Narayan and others, he said.