Museveni, 60, announced he will remove limits on the number of terms a president may serve from the constitution, which would allow him to seek re-election in 2006.
He seized the presidency 18 years ago. If his new campaign succeeds, he will stay in office until at least 2011.
He inherited a country in chaos after years of guerrilla war and the brutal dictatorships of Milton Obote and Idi Amin.
But in his first decade, he rebuilt the state and introduced free-market reforms that achieved annual economic growth of 7 percent.
"This is the watershed between democracy and autocracy in Uganda," said Augustin Ruzindana, who spent 10 years in the president's cabinet and has known Museveni since high school. "If he succeeds (at remaining in power), it would be a very serious matter, not only for this country but for democracy in Africa."