About 150 police were deployed to protect the home of Prem Tinsulanonda, the king's senior adviser, who is accused of masterminding the coup.
Police said that about 2,000 people had gathered for the rally in a plaza near the Grand Palace by 6.30pm (1230 GMT), despite the threat of rain.
Organisers said they expect 50,000 people to join the rally, which is due to last late into Saturday night.
Surayud Chulanont, the army-installed prime minister, said he was ready to hold talks with "any parties" to bring an end to the political upheaval in the country.
"I am always ready to talk to any parties to solve problems," Surayud said on Thai television.
Jatuporn Prompan, protest organiser and Thaksin ally, said: "The junta should get out. Negotiation is good, but as long as the junta remains in power, it is useless."
Earlier in the week, the the army-backed government gave Thaksin approval to return home for the first time since the bloodless September 2006 coup and fight to regain $1.5 billion in assets frozen by Thailand's powerful anti-graft body.
On Friday, the 57-year-old deposed premier called for new polls and vowed to defend himself against allegations of corruption, in only his second address to the Thai people since he was forced from his position.
The freezing of Thaksin's assets was one of several legal blows the former premier has suffered in recent weeks.
An anti-corruption team set up by the military recommended in May that he and his wife Pojaman face charges over a controversial land purchase.
The military has justified the coup by saying that Thaksin, a self-made billionaire, was corrupt, and promised to probe the allegations.