Party leader Paiboon Nititawan has handed a letter to the Election Commission calling on it to decide whether to invalidate the princess's nomination, saying it could breach the law that prevents political parties from using the monarchy for campaigning.
The royal family is highly regarded in Thailand and carries great influence - especially in the case of recently deceased and longstanding King Bhumibol Adulyadej.
Prayuth accepted his nomination from the Palang Pracharat Party, a new party set up by his loyalists, in an official statement.
The surprise entry of his sister Ubolratana into politics - assumed to be with his blessing - raises questions about whether the long-lasting partnership of the palace with the army is in jeopardy.
He was toppled in a 2006 coup, while his sister Yingluck was booted from power in a 2014 military takeover and forced into exile to avoid a jail term.
One of the key losers from the announcement will be the current PM and head of Thailand's military junta, Prayut Chan-ocha.
Ubolratana, a colorful, public-facing royal in contrast to her more restrained brother King Maha Vajiralongkorn, relinquished her royal titles after marrying an American decades ago.
The View's Joy Behar Under Fire for Resurfaced Blackface Photos
Conservative blogger Matt Walsh wrote, " Megyn Kelly was sacked from her show for asking a hypothetical question about blackface". Messages seeking comment were left with her agent and the ABC program.
The move was a first for Thailand, a constitutional monarchy since 1932 in which the royal family is expected to stay out of politics.
The Princess is now registered as a candidate for the Thai Raksa Chart party, an off-shoot of the Thaksin-backed Pheu Thai Party which is also contesting the forthcoming election.
"Who would dare criticise a royal prime minister?" said Puangthong Pawakapan, professor of political science at Chulalongkorn University.
"In everything we do we must devote our heart, our knowledge, every part of ourselves", she said in 2017 in a speech to mark her father's birthday.
Still, she has been working along with other Royal Family members since her return to Thailand and has been working with many charities and conducting "Royal" duties without carrying the title of HRH. "I want to reassure that I do not intend to hang on to power.
She also travelled throughout Thailand and saw the people's suffering", an unofficial translation of the statement reads. Born in 1951, she studied mathematics and biochemistry before earning a master's degree in public health, all in the US.
But she would not be covered by Thailand's strict lese majeste law against insulting the monarchy. Tragedy struck in 2004, when the pair's second son, Khun Bumi Jensen, died in the Indian Ocean tsunami in 2004.
On her Instagram account, the princess recently posted a video of her eating street food and another complaining about Bangkok's pollution.