The 70-year-old was defeated by political newcomer Renee Ellmers in Nov. 2010 in a close race in the 2nd Congressional District.
Etheridge served in Congress for 14 years and eight years before that as state schools superintendent.
Exactly a year ago, Gov. Bev Perdue tapped him to head North Carolina's Economic Recovery and Investment Office, which manages the state's remaining federal stimulus aide.
In a statement Thursday, Etheridge said: "After considerable thought and a whole lot of encouragement, I am announcing today, my candidacy for the Democratic Party nomination for Governor.
"My life's work has been about improving the public education system in North Carolina. As we move forward, we must ensure we are making the key investments in public education, community colleges and the university system.
"This election is about leadership. It's about moving forward - not moving backward.
"I will be talking about our future and our commitment to move North Carolina forward. If we want a 21st century economy, we must have 21st century schools."
The Harnett County Democrat joins Lt. Gov. Walter Dalton and state Rep. Bill Faison in the party's primary. Three others are still considering whether to get into the race. U.S. Reps. Brad Miller of Raleigh and Mike McIntyre of Lumberton and former State Treasurer Richard Moore each said Thursday they were still considering a gubernatorial bid.