Thai Prime Minister Yingluck Shinawatra has dissolved parliament and called for fresh elections owing to the relentless anti-government protests across the southeast Asian nation.
However, anti-government protesters plan marches to demand the creation of an unelected "People's Council" to run an interim government.
Yingluck admitted she was forced to take the decision to prevent "any loss of life".
"At this stage, when there are many people opposed to the government from many groups, the best way is to give back the power to the Thai people and hold an election. So the Thai people will decide," she said in a televised address to the nation.
No date has been announced for the elections, but according to the Thai constitution, elections must be held within two months of dissolving the parliament. Yingluck will remain as caretaker prime minister until the new elections.
"The situation seems likely to escalate to violence so the government has decided to return power to the people and let them decide through elections," Yingluck added.
Nonetheless, opposition campaigners are determined to step up their protests and vowed to march towards government offices in Bangkok. At least 50,000 protesters are rallying in various parts of the Thai capital.
"Today, we will continue our march to Government House. We have not yet reached our goal. The dissolving of parliament is not our aim," said Suthep Thaugsuban, the opposition leader spearheading the protests.
The protesters are demanding an interim unelected body vaguely defined as the "People's Council" to replace what they call "Thaksin's regime". The protesters insist the entire administration needs to be revamped and Yingluck and her family members should leave the country.
The anti-government protests were originally set off by a controversial amnesty bill which might have allowed Yingluck's brother and former leader Thaksin Shinawatra to return from his self-imposed exile.
Thaksin was overthrown in a military coup in 2006 and Yingluck is accused of running the government as his proxy, leading to the biggest protests in Thailand since 2010.