Billy Hutchinson, leader of the Progressive Unionist Party which is linked to the UVF, said he believed the process that led to restrictions on the number of days the flag is flown was illegal and should be challenged.
Hutchinson said: "It may have been a democratic decision between people in the City Hall but I think that the process was flawed."
He was speaking after around 1000 people protested against the decision to remove the flag on certain days for the second Saturday in a row. The previous weekend, 2000 people demonstrated.
Hutchinson refused to be drawn on the specifics of action, but said a number of areas were being explored and hinted that there could be a development within days.
He said: "We believe there are a number of decisions that we can take because we believe that there was (sic) illegal actions taken. I am not going to make promises to anybody. What I am saying is that we are going to try to put the flag back."
There has been widespread disorder across Northern Ireland since Belfast councillors voted on December 3 to reduce the number of days it flies the Union Flag from 365 to 17.
The controversial vote followed a public consultation on flags.
Almost 30 police officers have been injured in the trouble and more than 40 people arrested.
Yesterday's protest passed off peacefully, but city traffic was gridlocked for about an hour.
Earlier, several hundred peace campaigners formed a human chain around Belfast City Hall in response to the recent violence.