The grand alliance named Pakistan Awami Ittehad (PAI) will be headed by 74-year-old Pervez Musharraf, while Iqbal Dar has been appointed as the Secretary General.
Addressing media persons through video conferencing from Dubai, the former president said all parties representing Muhajir (migrant) community should be united, local media reported.
He invited the Muttahida Qaumi Movement (MQM) and the Pak Sarzameen Party (PSP) to join the new political alliance.
About the nature of alliance, he said all the member parties will contest together with one name.
Gen Musharraf denied reports that he was going to head the MQM, claiming that it was "ridiculous" to think that he would want to be head of a "minor, ethnic party".
"MQM-Pakistan is merely half of what the (original) party used to be," he said. "I am concerned about (the internal problems) of the party; however, I have no interest in replacing Farooq Sattar or Mustafa Kamal even if their parties are united," he insisted.
Criticising MQM, he said that the party and the muhajir community have lost respect. "The muhajir community would do better to abandon ethnic politics and join PAI," he said.
He expressed hope that Pakistan Muslim League-Quaid leaders Chaudhry Shujaat and Chaudhry Pervez Elahi would join his grand alliance as well.
The former president also advised Pakistan Tehhreek-i-Insaf (PTI) chairman Imran Khan to "join hands with a group that would take Pakistan forward" while accusing him of only thinking about his own party.
Gen Musharraf thanked the alliance for appointing him as the chairman and announced that he would "return to Pakistan soon", adding that he did not want any security when he does since the country's situation is better now.
Gen Musharraf had left the country for Dubai in March last year after the interior ministry issued a notification to remove his name from the exit control list (ECL).
He said he will return at the "appropriate time" so that the "development work in the country is not disturbed".
Gen Musharraf, who was charged with treason by a special court last year and was declared an absconder in the Benazir Bhutto murder case in August this year, claimed that he was ready to face all charges as the courts are not under "Nawaz Sharif's control anymore".
"The accountability process should not be affected by my arrival (to Pakistan)," the former military dictator said, adding that the courts and the armed forces must be "allowed" to function as both institutions are working in the country's favour.