West Ham won their final four games of the season to successfully move out of the relegation zone at the expense of Sheffield United.
However, the Blades have refused to give up the fight despite having an appeal over the decision not to dock West Ham points rejected by an independent arbitration panel back in June.
They also failed in a subsequent High Court bid to have the ruling overturned during a summer of legal wrangling.
The Bramall Lane club - who estimate the cost of their relegation at being up to £50million - are set to claim West Ham gained an unfair advantage by breaking league rules.
"After consideration and discussion with our legal advisers, Sheffield United are today initiating legal proceedings against West Ham United as we seek substantial compensation for our relegation from the Premier League," confirmed Toby Craig, a member of the club's legal team.
Back in June, plc chairman Kevin McCabe hinted legal action could follow should the arbitration panel reject their appeal.
He said: "The reality is that there was an injustice committed and as a result Sheffield United were relegated from the Premiership in the season that's just finished.
"We believe we have maybe got a human-rights issue because of the loss of jobs that has been established if we are relegated, the salaries that are reduced because of going from the Premiership to the Championship and those sort of issues."