Positioned as "the small agency with big friends", it will target clients with spends of less than £2 million and will work either on a project or a retained basis.
Working alongside the main agency and tapping into its resources, Upstart aims to offer clients the opportunity of working with fewer people and will try to turn campaigns around swiftly.
Its first project is working with one of TBWA's existing clients, Eurostar, and it is developing a campaign for Eurostar Ski.
As well as working with some of TBWA's clients, the agency will be pitching for business independently.
The agency is headed by Andrew Stirk, who has worked at TBWA for the past two years. Stirk will report to Andrew McGuinness, TBWA's chief executive.
McGuinness said: "TBWA\ Upstart is going to be a force to be reckoned with. The premise is to disrupt market conventions to respond to changing client needs."