"I have decided to be a part of the NDA for the development of the state and the Konkan region," Mr Rane told reporters.
Mr Rane, who resigned from the Congress party about two weeks ago after a long-drawn tussle with its state leadership, had claimed three days back that Chief Minister Devendra Fadnavis had invited him to join the NDA.
The alliance is seen as a safety net for the NDA in case of an exit by Shiv Sena, who have been at odds with the ruling BJP.
There was speculation when he quit, that he would join the BJP, but Mr Rane decided to start his own party.
A prominent leader from the influential Maratha community, Narayan Rane hails from Sindhudurg district of the Konkan region. He became the chief minister in 1999 when he was in the Shiv Sena.
He quit the Congress, allegedly because they had promised him the chief minister post, a promise he accused them of reneging on.
"Ahmed Patel had told me after I joined Congress that I would be made the chief minister," Mr Rane said while addressing a press conference in his native Sindhudurg district in coastal Konkan region.