Thai Prime Minister Thaksin Shinawatra has dissolved parliament and called a snap general election on 2 April.
Mr Thaksin is under fire for a controversial share sale
In a televised address, Mr Thaksin said there were "people who want the government to fall" and an election was "the best way to move forward".
In recent weeks he has faced growing calls to resign, amid mounting criticism over his family's sale of shares in telecoms giant Shin Corp.
A major anti-Thaksin demonstration is planned for Bangkok this Sunday.
Until Friday's announcement, elections were not due in Thailand for another three years.
But now, under the Thai constitution, they must be held within 60 days.
Hours after dissolving parliament, Mr Thaksin appeared on television to explain his actions.
"I know there are people who want the government to fall.... We have tried to persevere and explain, but no-one is interested. All they do is talk about wanting me to quit. But supporters are urging me to keep strong and stay," he said.
"I will accept whatever the people's decision is.
"I have wondered what is the best way to proceed... I decided that an election is the best way to move forward," he said.
Analysts said Mr Thaksin hoped the surprise announcement would quell the growing discontent amid various groups who have called for his resignation.
Only a year ago his Thai Rak Thai party won 375 out of 500 seats in the general election, and he is widely expected to retain power, but with a reduced majority.
Mr Thaksin has faced calls to resign since his family sold its stake in Shin Corp, the company he built up before he entered politics, last month.
The sale, which netted the family members and others $1.9bn, has angered many urban Thais, who complained the family avoided paying tax and passed control of an important national asset to Singaporean investors.