The centre-right Radical party – one of four parties represented in the Swiss government - has strengthened its ties with the smaller Liberal party.
The two parties, which already present a united front in parliament, said on Saturday that the new alliance presented a "liberal" alternative to the political polarisation in the country.
The president of the Radicals, Fulvio Pelli, told a joint party meeting in Neuchâtel that liberal values were important to put Switzerland on the right track for the future.
About 400 members of both parties attended the founding of the new "Radical and Liberal Union".
A first move in this direction was taken two years ago when the parties joined forces in parliament.
"We don’t want Switzerland to get stuck in the slow lane, watching the rest of Europe and the world overtake us," Pelli said.
What the country needed, he added, were progressive right-wing and liberal virtues such as inventiveness, creativity, willingness for risk taking, stamina and a fighting spirit.
The parties said in a resolution that they wanted to continue bilateral negotiations with the European Union, and therefore called on voters to agree in September to extend the free movement of people treaty to the 10 new EU states.
The Radicals, which most closely represents the interests of Switzerland’s business lobby, is the third largest party in parliament.
It has lost ground in recent years to the right-wing Swiss People’s Party.
The Liberal party has most of its support in western Switzerland, and has four members in the House of Representatives.
swissinfo with agencies
The Radical and Liberal Union was founded at a joint meeting of the parties in Neuchâtel.
The Radical party dates back to the founding of the modern Swiss state in 1848. It is historically the party of the upper middle classes, and is represented in all cantons, with 150,000 members.
There are 34 Radical party members in the House of Representatives, 14 in the Senate and two in the cabinet, the finance minister, Hans-Rudolf Merz and interior minister, Pascal Couchepin.
The Liberal party, with 10,000 members, is represented in cantons Geneva, Neuchâtel, Vaud, Basel City, Bern, Valais, Fribourg and Zurich.
There are four Liberals in the House of Representatives.