Thailand's caretaker government lifted a state of emergency in the capital on Sunday, nearly two weeks after it was declared following clashes between pro- and anti-government protesters.
"We have analysed that the situation is less serious and if we still maintain the state of emergency, it might damage the country," acting prime minister Somchai Wongsawat told a press conference.
The emergency in Bangkok was declared on September 2 after anti-government protesters besieging the then prime minister's offices clashed with his supporters in violence that left one person dead and dozens wounded.
In a twist to the political turmoil, powerful army chief General Anupong Paojinda refused to evict the anti-government protesters.
Instead the general and Thai industry leaders last week called for an end to emergency rule.
Industry leaders said it was eroding confidence among foreign investors and had caused problems in at least 21 industrial sectors including in tourism, exports, logistics, clothing and printing.
The protesters have been demanding the resignation of prime minister Samak Sundaravej, who had refused to bow to their demands.
Instead the Constitutional Court stripped him of his powers last week, ruling he had illegally accepted payments for hosting TV cooking shows.
The ruling People Power Party and its coalition partners plan to nominate a new candidate for premier in parliament on Wednesday when a vote will then be taken by lawmakers.
But demonstrators who have squatted on the grounds of Government House since August 26 have vowed to stay as long as the ruling party remains in charge.