It had been giving the drug, called V-1 Immunitor, free of charge to thousands of patients, after its developers claimed it brought dramatic improvements in the health of HIV victims.
Now the Salang Bunnag Foundation says it will no longer hand out the drug in its clinics.
"We found that we were fooled by the company producing the pill. We have stopped distributing it," Dr Sek Aksaranukroh told the AP news agency.
The inventors of V-1 Immunitor claimed this simple pill contained an ingredient that provokes the body's immune system to attack HIV-infected cells.
V-1 Immunitor is made from the blood of HIV-positive patients along with calcium and magnesium.
Queues
People came from all over Thailand and even from abroad, and queued in their hundreds outside the clinics set up by the charity.
According to Jonathan Head, the BBC correspondent in Bangkok, many patients claimed to experience dramatic improvements in their health after taking it.
Others said they were willing to try it whatever its effects, since conventional HIV drugs are far too expensive for most Thais.
Some of those same patients now admit the improvements were just temporary, says Jonathan Head, and doctors at the charity have finally accepted that V-1 is not a miracle cure.
Estimates put the number of Thais having HIV - the virus which can lead to Aids - at between 750,000 and 1.5 million.
Most infected people in Thailand have no access to drugs that have been successfully used in the West.
Promboon Panitchpakdi from the aid group Care Thailand told the BBC: "Many people will do almost anything to try a drug in which they only have 10% faith, because what other choices do they have?"
Guinea pigs
Alex Renton from the Bangkok office of the Oxfam aid agency told BBC News Online last month that Thailand is becoming a dumping ground for other treatments that have been tested unsuccessfully elsewhere.
"We are seeing some international companies using Thai HIV-positive people as guinea pigs to try out drugs that in some cases have already failed their trials in Europe and the United States," he said.
"There is a lot of money to be made by evil people through this disease."
A less expensive version of the standard anti-retroviral cocktail of drugs is now being manufactured in Thailand, and thousands of Thai volunteers are involved in the world's largest trial of a new HIV vaccine.