Embattled leader cracks down after weeklong protest turns deadly.
Somchai made the announcement after meeting with the country’s army chief and other senior security officials.
He said political tensions remain but they do not justify keeping the Thai capital under emergency rule.
“We have analysed that the situation is less serious and if we still maintain the state of emergency, it might damage the country,” Somchai said.
The emergency in Bangkok was declared on September 2 after anti-government protesters besieging the then prime minister’s offices clashed with his supporters in violence that left one person dead and dozens wounded.
In a twist to the political turmoil, powerful army chief General Anupong Paojinda refused to evict the anti-government protesters.
The protesters have been demanding the resignation of Samak Sundaravej, the prime minister, who had refused to bow to their demands.
Instead the Constitutional Court stripped him of his powers last week, ruling he had illegally accepted payments for hosting TV cooking shows.
The ruling People Power Party and its coalition partners plan to nominate a new candidate for premier in parliament on Wednesday when a vote will then be taken by members of parliament.