Speaking from Geneva, his home for the past 27 years, Benouari told the Tribune de Genève that he would stand but admitted he had not expected to "announce his candidacy from Switzerland".
The former minister, 62, said he "thought he could infuse modernity into the debate" by running for office.
He added that he expected "free elections".
"The questions is how to stop the Islamists from winning again and exercising power for their own benefit."
An economist, Benouari was Algeria's finance minister from 1991 to 1992.
He was granted Swiss nationality in 2000 and has also stood for office in his adopted country.
Benouari founded the Swiss Association of Muslims for Secularism and chairs a consulting company.