Rebel unionists Basil McCrea and John McCallister have confirmed they will form a new party.
The pair, who quit the UUP earlier this month, said a new political dynamic was needed in Northern Ireland.
Writing in today's Belfast Telegraph, they said: "It is time for a confident, generous, progressive pro-Union party to step forward and build support for a modern Northern Ireland."
Both resigned from the UUP following the selection of a sole unionist candidate for next month's Mid Ulster by-election.
They have long opposed unionist unity and co-operation with the DUP.
In a thinly-veiled swipe at Nigel Lutton's selection as a unity candidate in Mid Ulster, they claimed pro-Union parties "should not be leading a retreat into sectarian trenches".
They said flag protests, dissident activity, economic austerity and rising unemployment threaten peace.
"The decision to run a unionist unity candidate in the Mid Ulster by-election will do little to improve the situation," they added.
"In fact it will make matters worse. It will polarise our communities, increase tension and reinforce the political domination of the DUP and Sinn Fein."
Mr McCallister and Mr McCrea said the selection of a unity candidate meant there was now little to separate unionist parties.
"A diverse pluralist electorate will reject such a one size fits all approach," they added.
"All of these people need someone to vote for, democracy itself needs a choice, and Northern Ireland needs a new political dynamic. For those reasons and for the many people who despair of the political landscape in a place we like to call home, we have concluded that a new political party is required."
They said the new party – as yet unnamed – will represent all sections of the community and will seek to provide leadership to the people of Northern Ireland.
They concluded: "Many people are disillusioned with the current political process. A significant number have encouraged us to start a new party. If the existing political parties were the answer this would not be the case."
Born in Ramelton, Co Donegal, Basil McCrea was elected to the Assembly in 2007 as MLA for Lagan Valley. He lost out to Tom Elliott in a leadership ballot in 2010. Earlier this year he was disciplined over comments he made during the Union flag dispute.
John McCallister has been MLA for South Down since 2007. He challenged Mike Nesbitt for the party leadership last March.
Both men quit the UUP this month