Thai Prime Minister Yingluck Shinawatra has dissolved parliament and called an election after sustained protests in the capital, Bangkok.
All opposition MPs resigned from parliament on Sunday, and protesters marched again on Government House.
Ms Yingluck won a huge majority in the last election in 2011.
But the protesters say her government is controlled by her brother, ousted leader Thaksin Shinawatra, and have vowed to continue demonstrating.
Early on Monday, as protesters set off for Government House, Ms Yingluck announced on television that she would call elections.
“The government does not want any loss of life,” she said.
“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,” she said. “So the Thai people will decide.”
The elections will likely be held on 2 February, Thai government officials say.
In the general election in July 2011, Ms Yingluck’s Pheu Thai party won a majority, with 265 seats to the Democrat Party’s 159 seats.
Pheu Thai draws considerable support from mainly poor and rural areas of Thailand, and would be seen as well-placed to win an election.
The BBC’s Jonathan Head, in Bangkok, says the election call is still unlikely to satisfy many of the protesters, who have argued that the entire democratic system needs to be changed, and that Ms Yingluck and her family must leave the country.
Anti-government protesters, who have been calling for her government to be replaced with an unelected “People’s Council”, say the rallies will continue.
Protester leader Suthep Thaugsuban, who was formerly a senior opposition politician, said: “The movement will keep on fighting. Our goal is to uproot the Thaksin regime.”
“Although the House is dissolved and there will be new elections, the Thaksin regime is still in place,” he added.
Around 150,000 protesters are out on the streets of Bangkok, converging around Government House from several different directions.
More than 60 schools in Bangkok have closed as a precautionary measure, AP news agency reports.
“Police are unarmed, with only shields and batons. We will not use tear gas, or if we have no choice, its use will be limited,” Interior Minister Jarupong Ruangsuwan said on Sunday.
There have been no reports so far of violence in Monday’s protests. However, violent clashes broke out during last week’s protests, with five people killed.
More than 90 people died during the political turmoil of 2010, when thousands of supporters of ousted leader Mr Thaksin, who is also Ms Yingluck’s brother, occupied parts of Bangkok. They were eventually cleared by the army.
Mr Thaksin is in self-imposed exile after he was overthrown in a military army coup in 2006 and convicted of corruption. However, he is still considered influential in Thai politics.
The latest row began when Ms Yingluck’s government attempted to introduce a controversial political amnesty bill, which critics said would have allowed Mr Thaksin to return to Thailand without having to serve time in jail.
The bill sparked massive opposition and brought tens of thousands of protesters to the streets.
It was rejected by the Senate, but anti-government demonstrations continued, as protesters called for the government to resign.