On Tuesday, the election commission announced the PPP has won 233 of 480 seats in the lower house of parliament.
The rival Democrat Party was second with 165 seats, while the Chart Thai Party finished third with 37.
Thaksin was ousted in a Thai military coup in September 2006 while he was abroad and has since lived in exile, mostly in London.
He is legally barred from office, the courts dissolved his Thai Rak Thai party, and he has been charged with corruption-related crimes.
But the pro-Thaksin PPP campaigned on a pledge to bring him back into Thailand's political scene and secured the most number of votes in Sunday's parliamentary elections.
Although it failed to win the absolute majority needed to form the government outright, the party said on Monday that it had enough support to form a coalition government.
Surapong Suebwonglee, the PPP's secretary-general, said: "Other parties have agreed to join a coalition, which would give us more than half of the seats in parliament."
He would not say, however, who the other parties were.
Thaksin said he wanted to return to Thailand to face the allegations against him and prove he is innocent.
"I'm sure I can prove my innocence as all the allegations are empty," he said.
The billionaire tycoon said he would not resume his political career.
'Enough of politics'
"I really want to go back as a normal citizen. Enough is enough for politics," he said.
However, when asked if he would be willing to act as a political adviser to the PPP, Thaksin said: "If they want my opinion and ideas, then I will give it to them."
He added: "I appreciate the Thai people who always think of me and want to see the policies implemented by me brought back."
But Thailand remains deeply divided.
The PPP got most of its support in Sunday's elections from the rural north and northeast, where Thaksin's programmes, including universal healthcare and generous village development funds, were popular.
The Democrats, a distant runner-up in the polls, ran strongest in Bangkok, where the 2006 movement to oust Thaksin was centred.
Thai politics has been in almost constant turmoil since early 2006, when protests mushroomed demanding that Thaksin step down, despite his party's landslide victory a year earlier giving it an absolute parliamentary majority.
An April 2006 election was boycotted by the opposition and later declared invalid by the courts, leaving Thaksin's government in limbo until the September 19 coup last year.
While acknowledging he may have made some mistakes while in office, saying "perhaps I was too confident", Thaksin defended his methods of governing on Tuesday, saying some people took offence because he was "too decisive".