Nick Clegg urged the Liberal Democrats to be "bolder" as he launched his leadership bid today.
The party's home affairs spokesman - hot favourite to take the top job after Sir Menzies Campbell's resignation - insisted it was time to "look to the future".
He told an audience in Sheffield: "If the Liberal Democrats are to change the tired old pattern of British politics, we are going to have to be bolder.
"We are going to have to move out of our comfort zone."
Mr Clegg said the party would have to take "greater risks than it had ever done before".
"The stakes are high. If we're honest, over the last two years or so the Liberal Democrats have been looking inwards too much."
"We cannot test the patience of the British people any longer.
"We must now make a long term commitment to British Liberalism.
"We must step up or risk falling back for good," he added.
Mr Clegg - who will fight it out with environment spokesman Chris Huhne for the leadership - praised Sir Menzies as a man of "honour and integrity", and said he had guided the party through a "difficult time".
Mr Clegg said the coming contest offered a "great opportunity" for the party to reach out directly to the public and be "outward-facing once again".
There were "millions" of people who shared Liberal values, but did not vote for the party.
"The Liberal Democrats now have the opportunity, once and for all, to break the stifling grip of two-party politics... and give a voice to the millions of people who don't feel they have a voice in British politics at all."
He added: "We should be proud of the progress we have made - immensely proud.
"But we are not where we need to be, not yet."
Mr Clegg said the party should be "immensely proud" of its recent achievements, "but we are not where we need to be, not yet.
"That is why I want our party to be a gathering point for everyone who wants a different type of politics in Britain."
Calling for more independent freedom, he went on: "A politics that begins, quite simply, by giving more power to people, to communities and their families.
"A politics of people, not systems; communities not bureaucracy; individual innovation not Government diktat. I believe this is the British way."
He went on: "We have always put our faith in the power of ordinary men and women to shape the world.
"These are the best instincts of the British people; these are the liberal instincts of the British people; and these are the instincts which under my leadership will be at the heart of the Liberal Democrat vision of Britain."
Both Mr Clegg and Mr Huhne come from the modernising group on the right of the party, and the latter has acknowledged that their agendas are very similar, with only "nuances" of difference likely to emerge over the course of the campaign.
The poll of more than 55,000 Liberal Democrat members across Britain may hinge on personality, rather than policy.
Activists are thought to be keen to choose a "telegenic" leader who will fare better in promoting the party's message through the modern media than Sir Menzies, who admitted his chances were hampered by negative comments about his age and stiff performance.
Sheffield Hallam MP Mr Clegg, 40, has already won the support of former leader Lord Ashdown and manifesto writer Steve Webb - who had been tipped as a possible candidate from the left of the party - as well as prominent women MPs Julia Goldsworthy and Sarah Teather.
Mr Huhne, 53, the MP for Eastleigh in Hampshire, launched his campaign on Wednesday with a promise to create a "fairer and greener society".
He enjoys the backing of Lib Dem frontbenchers Lynne Featherstone, Tom Brake and Sandra Gidley.
Birmingham Yardley MP John Hemming, who had been sounding out parliamentary support for a challenge for the leadership, last night conceded he would not secure the necessary seven MPs' nominations.
In a message on his weblog, Mr Hemming wrote: "It is quite clear that I will not be a candidate in the leadership election. I will, however, not decide for now who I will support and I will announce that in the future when I have discussed matters with the other candidates and colleagues in Birmingham."
With a result expected by December 17, whichever of the two candidates wins the election will become the leader with the least parliamentary experience in the party's history.
Both are former MEPs who were first elected to the House of Commons in 2005. Mr Huhne made his first bid for the leadership eight months after arriving in Westminster, coming from behind to take a strong second place behind Sir Menzies in the battle to succeed Charles Kennedy.
Mr Kennedy himself poured more cold water last night on a bid to regain the leadership he resigned in 2006 amid concerns over his drinking, telling BBC1's Question Time: "I think I have had my shot. I have had two general elections."
A number of other senior figures - including acting leader Vince Cable, transport spokeswoman Susan Kramer, election co-ordinator Ed Davey and schools spokesman David Laws - have already ruled themselves out of the contest.
More than 100 people greeted Mr Clegg with a standing ovation as he entered the Showroom Cinema in Sheffield.
Standing against a stark white background with no campaign posters or logos in sight, the MP gave his statement to the gathered press and party supporters with only a few glances at his notes.
Answering questions after the speech, Mr Clegg said he had nothing but "admiration" for his rival, Chris Huhne.
"This is not about personalities," he said.
When pressed on the pair's "highly similar" policies, the home affairs spokesman said it would be "distressing" if that was not the case.
"With respect, it is no surprise there are agreements between two candidates of the same political party," he said to laughter and applause. "We share the same beliefs."
Dressed in a navy suit with striped blue tie, Mr Clegg looked confident and relaxed during his statement and the 10-minute question-and-answer session.
Supporters on the front row, wearing yellow rosettes, looked enraptured as he exclaimed: "I'm a liberal."
The Sheffield Hallam MP said he chose to give his statement in his constituency because he was tired of "the old Westminster politics".
Waving his arms around the modern airy room, he said: "This is a very apt venue to underline that we are the party for all parts of the country.
"We know how to win in the cities as well as the countryside."
One supporter stood up and asked Mr Clegg what he thought of the Government's stance on "eroding civil liberties", as others nodded in general agreement.
"The Government are not doing this in our name," the MP replied. "Eroding these liberties doesn't make us safer. This is not done in the name of security."
The Clegg CV
Born: 7 January 1967
Education: Westminster School; Cambridge (social anthropology)
Career: Trainee journalist, Nation magazine, New York 1990 Political consultant, GJW Government Relations 1992-93 EC official
1994-96 Adviser to Commission vice-president Sir Leon Brittan
1996-99 Part-time lecturer, Sheffield University
1999-2004 MEP for East Midlands
May 2005 MP for Sheffield Hallam
2005-06 Foreign affairs spokesman
2006 to date Home affairs spokesman
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