The senator, who is a possible Republican candidate, said he and the conservative activist group FreedomWorks filed the suit on behalf of "everyone in America who has a phone".
The lawsuit calls for an end to the bulk collection program that's been in existence since 2006. The program violates the US Constitution's Fourth Amendment right against unreasonable searches. It was revealed by former National Security Agency analyst Edward Snowden.
However, the Obama government says that the program, begun under President George W Bush, is legal.
The Obama government says that the surveillance program is legal
In order to gain public trust, President Barack Obama has called for reforms to the program as many people, like Paul, have called for the end of surveillance.
Paul's lawsuit is seen by many as an image-making effort ahead of the polls.
The White House and justice department did not comment on the lawsuit specifically, but said they believe the bulk collection of phone records is legal.
"This, we believe, will be a historic lawsuit," Paul said after filing the complaint in US district court in the District of Columbia. "We believe that this lawsuit could conceivably represent hundreds of millions of people who have phone lines in this country or cellphones."
Ken Cuccinelli, the former attorney general of Virginia, is the lead counsel for Paul and FreedomWorks on the suit. "This is a constitutional challenge primarily," Cuccinelli told The Associated Press. "We're not debating national security policy."
This is not new for Cuccinelli, who has sued the Obama administration before - he was the first state attorney general to mount a legal challenge to the constitutionality of the president's signature health care overhaul.
The controversial program
The bulk collection program, which is authorized in Section 215 of the USA Patriot Act, sweeps up what's known as metadata for every phone call made in the US. It collects the number called, the number from which the call is made and the duration and time of the call.
While the intelligence community says having this data is key to preventing terrorism, manyargue this as a intrusion into people's privacy.
Paul's lawsuit was filed against Obama; director of national intelligence James Clapper; NSA director Keith Alexander; and FBI director James Comey.