The action, lodged by Margalit Injury Lawyers in Victoria's Supreme Court, is on behalf of all professional AFL players who sustained concussion-related injuries while playing or training between 1985 and March 14 this year.
More than 60 former players and family members of dead players have signed on.
"Their careers are finished and years later they find these concussion-related injuries creeping in and affecting their ability to work, their ability to have a happy family life," managing principal Michel Margalit said outside the court in Melbourne on Tuesday.
She said the firm was seeking about $2 million per player plus medical expenses - and more players could join.
"The whole class action could cost the AFL close to $1 billion," Ms Margalit said.
"But we must remember that this is not about bringing down the AFL, this is about compensating these injured players, this compensation will come through insurance."
The lead plaintiff is Jarad Maxwell Rooke, better known as Max Rooke.
The dual premiership player was employed by Geelong Football Club between 2001 and October 2010, playing 135 games.
Rooke was concussed between 20 and 30 times and was knocked unconscious through head strikes on at least two occasions, the class action writ said.
"As a result of the breach of duty and negligence of the defendant, the plaintiff has suffered injury, loss, and damage," it added.
The class action alleges Rooke sustained permanent and life-altering injuries as a result of concussion-related injuries and because of the AFL's negligence.
The identities of the other players involved have not been made public but Ms Margalit said they included former premiership players, well-known faces and lesser-known players.
"It's things like memory loss, irritability, depression," she said.
"You have these otherwise strapping, fit-looking blokes who might be crying in front of you within a few minutes of talking to them. It's absolutely devastating."
The firm is open to negotiating with the league and has been speaking with neurology experts in preparation for them to give evidence in court.
The writ points to a history of medical knowledge about the impacts of concussion and alleged it was reasonably foreseeable to the AFL that players were vulnerable to concussion caused by head strikes "at all relevant times".
"Since at least 1992, it has been known that brain injuries are one of the most catastrophic athletic injuries and that once a player has incurred a concussion there is a heightened risk of a second or further concussion," the writ said.
It cited the AFL's alleged failure to make and enforce rules, policies, procedures and protocols in line with medical knowledge to reduce the incidence of concussion as evidence of its "negligence".
The AFL also failed to adequately conduct risk assessments for head strikes and concussions and to educate players about the risks of long-term injury arising from concussion - particularly as they related to an early return to play, the writ said.
The AFL said it had not yet received formal correspondence regarding the class action.
"The AFL takes concussion and the protection of the brain health of all those playing our game extremely seriously," a spokesman said on Tuesday.
"Today we launched updated concussion guidelines for the elite game, where players that are diagnosed with concussion must pass the 11-steps of the return to play protocol of over a minimum of 12 days in order to be medically cleared to return to play."
Last year, the AFL apologised to past players who were "let down" by the league's concussion research project after an independent review criticised the study.
It was underfunded and under-resourced and some AFL players dumbed down their baseline concussion testing in pre-season to reduce the chance of a concussion diagnosis on game day, the review found.
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