Thai Prime Minister Surayud Chulanont has offered to hold talks with ousted former leader Thaksin Shinawatra.
Thousands of Thais joined a peace rally near Bangkok's royal palace
The offer came as thousands of Thaksin supporters rallied in the capital, Bangkok, amid a security crackdown.
But organisers cancelled a march to military headquarters as protest groups and security officials accused each other of provoking violence.
On Friday, Mr Thaksin called for fresh elections and vowed to clear his name, in a video shown in Bangkok.
Thaksin supporters have rallied nightly for two weeks since his party was banned in May.
'Ready to negotiate'
In his weekly radio and television address, Mr Surayud said he was ready to negotiate with Mr Thaksin on "every issue where we have problems".
"I have been ready for nine months," he said. "If we can negotiate, it would be of the utmost benefit, but we haven't done it."
Thailand's military government says it will hold elections in December
About 10,000 people joined Saturday's peace rally at a park near Bangkok's royal palace, Thai police said. Protest organisers said 50,000 people attended.
Protesters chanted "Fight, Thaksin, fight" under a giant banner reading "Democracy now".
More than 10,000 police were mobilised for the protest, with another 13,000 soldiers on standby, officials said.
Thousands had also been expected to join the march to army headquarters.
There were conflicting reports as to why the march was cancelled, but one protest organiser told the Associated Press news agency there were fears the military would provoke clashes as an excuse to arrest protesters.
"We decided not to march tonight because we are afraid that we will fall into a trap," Jakrapob Penkair said.
Other reports said the march was cancelled due to poor weather.
'Return to democracy'
In his video address on Friday, aired to a crowd of at least 13,000 supporters in Bangkok, Mr Thaksin called for the election process to be sped up and urged a return to democracy. Mr Thaksin recorded the address in London, where he now lives.
The military government has said it plans to hold elections this December.
Mr Thaksin was ousted in a bloodless coup last year.
In May, a court ordered his Thai Rak Thai party be dissolved because of electoral violations.
This week, the committee set up to examine corruption claims against Mr Thaksin said it had concluded that he had "committed wrongdoings".
It issued two orders freezing his assets, including 21 accounts holding money made from the controversial sale in January 2006 of Shin Corp, his telecoms giant, to a Singaporean firm.