At a rally of some 6,000 party faithful in Madrid, among them former prime ministers Felipe Gonzalez and Jose Luis Rodriguez Zapatero, 42-year-old career politician Susana Diaz said she would stand in the May primaries.
"I am presenting myself as a candidate because I want to bring back the passion for winning," said Diaz, a plumber's daughter who since 2013 has been the regional president of Andalusia, a party stronghold.
She will face off against the party's previous chief, former economics professor Pedro Sanchez, 45, who was ousted in a bitter internal rebellion last year and Patxi Lopez, the 57-year-old former president of the northern Basque Country.
The primaries, to be held on an as yet unspecified date in May, will see some 180,000 activists - a quarter of them from Andalusia - vote for their preferred candidate in a choice which will set the future direction of the party.
Plagued by bad results in general and regional elections in 2015 and 2016, and challenged from the far-left by Podemos, the Socialist party is struggling to rise again and impose itself.
Podemos, under the charismatic Pablo Iglesias, has become Spain's third most powerful political force and threatens to overtake the Socialists as the main opposition grouping.
Sanchez has been a staunch opponent of Spain's conservative Prime Minister Mariano Rajoy and insists the party continue in this vein to have any hope of clawing back voters.
"With me as secretary general everyone, first of all Rajoy, will know what will happen after the primaries," he told a rally of supporters in the Mediterranean region of Valencia.
"We will never again have Socialist votes for rightwing policies in this country."
But this dogged resistance was his eventual downfall.
In October, high-ranking Socialist party members rebelled against him, arguing it was best to let a Rajoy-led government through rather than go to a third round of elections in poll-weary Spain and risk losing even more votes.
Sanchez resigned, an interim executive took charge and Rajoy eventually returned to power at the head of a minority government that now needs to negotiate many of its moves.
Conservatives fear that if Sanchez again leads the Socialists, his party and its lawmakers will go back into confrontation mode, blocking their bills or policies.
On the other hand, Diaz, who has said she "loves winning," advocates "moderation" and is seen as being more amenable to negotiating with other parties.
Lopez is also seen as a moderate.