The bomb also left 44 people injured, including up to five critically, when it detonated on Thursday night inside a pickup parked next to a busy hotel in Sungai Kolok, a town on the Malaysian border.
"One of the injured died this morning at Sungai Kolok hospital," taking the toll to six, a police officer in the town said.
The attack was the deadliest bombing in a campaign of violence that has gripped the Muslim-dominated deep south for the past 13 months and claimed about 600 lives.
It came just hours after Thaksin cut short a visit to the region during which he unveiled a controversial plan to block state funding for more than 350 "red zone" villages deemed to be prone to violence and sympathetic to separatists.
Most of the villages are in Narathiwat, the province where the blast occurred.
Thaksin said it was unlikely that foreign elements were involved in the attack but admitted it was aimed at putting pressure on his administration.
"The perpetrators were the offspring of those (suspected separatist militants) with outstanding arrest warrants and their aim was to put pressure on the government," he said in Bangkok.
100 kilograms of explosives
Narathiwat governor Pracha Taerat said the pickup was laden with about 100kg of explosives and was detonated outside the Marina Hotel in an area crowded with open-air beer bars.
He said the scale of the explosion and the methods used by the assailants marked a worrying new twist in the violence.
The Narathiwat governor said
violence had taken a new turn
"We did not expect this kind of car bomb. It is unprecedented in Thailand," the governor said in a televised interview late on Thursday.
All the dead are thought to be Thai, though police said they had officially confirmed the identity of only two victims.
Blast site sealed off
The area, a scene of devastation after the blast, was cordoned off as forensic officers continued Friday to pore over the site to collect evidence, police said.
Television footage showed fires raging on the road outside the hotel moments after the explosion. A power cut had blacked out the area, and glass and debris was strewn across the road more than a block away as the wounded were laid into the backs of pickups for transport to hospital.
The blast caused widespread
damage to the hotel
Four cars, five motorcycles and a number of nearby shops, restaurants and bars were destroyed by the bomb, while the Marina Hotel, where a wedding party had gathered on the third floor at the time of the explosion, suffered considerable damage.
Sungai Kolok, along the Malaysian border, has a thriving nightlife district routinely visited by scores of Thai and Malaysian tourists. It has been the scene of three other major blasts since March.
Thaksin had not visited Sungai Kolok on his trip but he had spent time the previous day in several spots in Narathiwat, one of three provinces that have endured the brunt of the separatist unrest.
A small bomb exploded on Friday in neighbouring Yala province, slightly injuring two soldiers assigned to provide protection for teachers fearful of attacks, police said.