The decision reshuffles the Palestinian political landscape in the run-up to the Jan. 9 elections. Barghouti, jailed by Israel for involvement in terrorism, is widely considered to be the most electable Palestinian candidate.
Barghouti has informed Fatah leaders through his lawyers that he will compete in the presidential election, said Amin Maqboul, the secretary general of the Fatah Higher Committee, one of Fatah's key institutions.
Barghouti's candidacy would deepen an internal power struggle within Arafat's dominant Fatah movement. Fatah's old guard earlier this week nominated interim leader Mahmoud Abbas (search) as the movement's presidential candidate.
The group is divided between its old guard, a group of politicians including Abbas that returned from exile with Arafat, and a younger generation of activists who grew up in the West Bank and Gaza Strip (search).
Abbas picked up a key endorsement Wednesday from some of the younger Fatah activists in the Palestinian legislature, seemingly reducing the probability of a Barghouti challenge.
On Wednesday evening, 55 of 66 Fatah legislators met with an Abbas confidant, Tayeb Abdel Rahim, and a majority endorsed Abbas, said one of the lawmakers, Dalal Salama.