of the capital - a day after forcing the cancellation of a summit of Asian leaders in a major humiliation for the government.
The red-shirted supporters of fugitive former prime minister Thaksin Shinawatra massed outside Abhisit's offices as night fell Sunday despite the premier's threats to use force to restore order.
"You don't have to be frightened of this state of emergency. I was the one who drafted the law," Thaksin said in one of two telephone speeches to around 15,000 red-shirted loyalists.
"This is a golden minute. We will make history," added Thaksin, who was ousted in a military coup in 2006 and is living in exile to avoid a jail term for corruption.
The latest escalation in Thailand's chronic turmoil came after police arrested the leader of the activists who forced the cancellation of Saturday's Asian summit in Pattaya, sparking renewed tensions with demonstrators.
Troops fanned out across the city to curb the most serious civil unrest of Abhisit's four-month rule, while armoured vehicles stood guard outside key government installations.
Protesters waving red flags stood atop one armoured car as it sped along a highway with a soldier at the wheel, amid reports that the demonstrators had captured at least one of the vehicles.
Television pictures showed red-shirted protesters armed with sticks and paving slabs smashing a car they mistakenly believed was carrying the prime minister as it left the interior ministry minutes after he issued the emergency decree.
British-born Abhisit later warned of tough action after two weeks in which security forces have repeatedly failed to take on protesters, both in Bangkok and at the Pattaya summit.
"I want to tell protesters that you have no right to break the law or to restrict other people's rights. Otherwise the government must implement further measures under the state of emergency," Abhisit said, alluding to using force.
Abhisit's deputy Suthep Thaugsuban also appeared on national television to appeal to soldiers and police to enforce the emergency measures, amid signs they were reluctant to intervene.
The army has generally shied away from confronting protesters since action against riots in 1992 left dozens dead, and police moves against anti-Thaksin demonstrators last October left two dead.
The crisis is the most serious since Abhisit came to power on the back of a court order that drove Thaksin's allies from government, a move that the so-called Red Shirts say was undemocratic.
It is the third state of emergency in eight months in Bangkok. The move bans public gatherings of more than five people and empowers the police and military to detain suspects for up to 30 days without charge.
"I don't care for this state of emergency, it's just paper dirtied with ink," protest organiser Nattawut Saikuar told the crowd.
Thaksin earlier said that he would return from exile if there was any violence. He is currently living in a foreign location, believed to be Dubai.
The chaos in Bangkok is a virtual replay of crises last year that ended up forcing out two premiers loyal to Thaksin.
Abhisit is under intense pressure to curb the unrest after the humiliating cancellation of Saturday's regional Asian summit, when authorities were forced to evacuate foreign leaders, some of them by helicopter.
The weekend summit was supposed to discuss the global financial crisis and North Korea's rocket launch and included the leaders of China, Japan and South Korea plus 10 Southeast Asian nations.
Police said they earlier arrested the former pop singer turned protest leader Arisman Pongreungrong at his Bangkok home "on the charge of inciting protesters to kidnap the prime minister and cause unrest in the country."