The Pheu Thai party, which heads the caretaker government that has been in place since last week, announced it was asking the country's king to dissolve parliament and call a new poll instead of having the House of Representatives vote for a new prime minister.
No date has yet been set for a vote in parliament, nor was it clear if the king would endorse dissolution.
The Constitutional Court last week dismissed Paetongtarn Shinawatra as prime minister for breaching ethics laws in a phone call with Cambodia's senate president Hun Sen about tensions over competing claims along their border, which erupted into a deadly five-day armed conflict in July.
King Maha Vajiralongkorn alone is empowered to dissolve parliament.
However, the Council of State suggested a caretaker prime minister could not call for dissolution unless a vote for a new prime minister reached a deadlock.
The opposition People's Party, the biggest party in parliament, announced on Wednesday its MPs would vote to appoint Anutin Charnvirakul, leader of the Bhumjaithai party, as the next prime minister.
People's Party leader Natthaphong Ruengpanyawut said the Pheu Thai party had failed to govern effectively in its two years in power.
However, its support is contingent on conditions in an agreement signed by Anutin, including that the prospective new government must dissolve the House of Representatives within four months and call a general election.
An Anutin-led government would also commit to organising a referendum on constitutional amendments to allow the drafting of a new constitution by an elected constituent assembly.
Acting Prime Minister Phumtham Wechayachai, who asked for a royal decree to dissolve parliament, warned of economic repercussions of a prolonged political crisis.
"With all of these problems, our lawmakers think we should return power to the people and let the people decide," he said.
The People's Party, then operating under the name the Move Forward Party, won the most seats in the 2023 election, but was kept from taking power when a parliament failed to approve its candidate.
Senators, who were appointed by a military government and were strong supporters of Thailand's royalist conservative establishment, voted against the progressive party because they opposed its policy of seeking reforms to the monarchy.
The Pheu Thai party then had one of its candidates, real estate executive Srettha Thavisin, approved as prime minister to lead a coalition government.
But he served just a year before the Constitutional Court dismissed him from office for ethical violations.
Srettha's replacement Paetongtarn, former prime minister Thaksin Shinawatra's daughter, also lasted just a year in office.
But even before she was forced out, her government was greatly weakened when Anutin's's Bhumjaithai Party abandoned her coalition right after her controversial call in June with Cambodia's Hun Sen.
Its withdrawal left Pheu Thai's coalition with just a tiny and unstable majority in parliament.
