The United Front for Democracy against Dictatorship (UDD), better known as the "red shirts", gathered in the capital to demand that Prime Minister Abhisit Vejjajiva dissolves parliament and calls an election.
Six hundred police were on duty and hundreds more on standby at Sanam Luang, a public square near Bangkok's Grand Palace.
The exiled Thaksin, who was blamed for instigating riots by "red shirt" demonstrators in April, addressed the crowd by telephone and accused Abhisit's government of mismanaging the economy, raising taxes and plunging the poor into debt.
He pledged his loyalty to his supporters and called for all Thais to put aside their differences.
About 20,000 protesters braved the pouring rain to listen to the hour-long address by the former telecoms tycoon, who was ousted in a 2006 coup and fled Thailand last year to avoid a two-year jail sentence for graft.
The "red shirts" are diehard supporters of Thaksin and the Puea Thai Party that he backs from outside the country.
Puea Thai's power base is mainly drawn from millions of rural and urban poor who loved Thaksin's populist policies and gave him two landslide election victories.
One of the UDD's core leaders, Veera Musikapong, asked for the crowd's consent to collect a million signatures and petition revered King Bhumibol Adulyadej to clear Thaksin of wrongdoing and allow him to return from exile.
The crowd clapped their hands and cheered in approval.
‘National Reconciliation’
"You all know that I do not forget people who help me," Thaksin said in response.
"I want to see national reconciliation. We should forget our differences and work together now."
Regarded as semi-divine by many Thais, the King is officially above politics but has intervened several times in disputes during his six decades on the throne.
The UDD staged a peaceful demonstration at Government House for several weeks in April, but the protests intensified when "red shirts" broke military lines and forced the cancellation of an Asian leaders' summit in the town of Pattaya.
A state of emergency was declared a day later and troops were sent to disperse crowds that were blocking a key Bangkok intersection.
The crackdown sparked Thailand's worst street violence in 15 years and severely dented investor confidence.
The UDD says Abhisit came to power because of a series of parliamentary defections that they say were engineered by the politically-powerful military.
Abhisit, who was elected in a parliamentary vote in December with the help of former Thaksin allies, insists he will not call an election until the battered economy recovers and a process of constitutional reform is complete.
