Formula E races will be staged in city centres around the world and its backers hope it will increase the market for battery-powered vehicles and advance the technology behind them.
Virgin was involved in Formula One racing for two seasons from 2010. Its Formula E team will be run by Alex Tai, who had a brief spell as head of the F1 team.
"The launch of the Formula E Championship is exciting news for racing fans but also for those that believe in developing the great electric cars of the future," said Branson, one of Britain's best known businessmen thanks to his long involvement in industries ranging from music to airlines and rail.
"The need to create fast, dependable and durable race cars will help to accelerate the sector and showcase electric cars to a large global audience," he added.
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The addition of Virgin means that Formula E has now unveiled nine of the 10 teams it hopes to have on the grid for its inaugural race in Beijing next September.
The new series is backed by Spaniards Alejandro Agag and Enrique Banuelos who are investing $100 million in the project.
"Having a global brand like Virgin, renowned for their technological innovation and sporting passion, as one of our ten teams is a fantastic addition to the championship," said Agag, who is the chief executive of Formula E.
(Writing by Keith Weir; editing by Amlan Chakraborty)
