The Thai government has ordered the army to retreat to its barracks in an effort to avoid further bloodshed on the streets of the capital Bangkok.
Twenty-one people were killed and more than 800 injured in fierce clashes over the weekend, as the army tried to disperse thousands of demonstrators from Bangkok's old city. Among the dead were civilians, soldiers and a Japanese TV cameraman.
The clashes erupted at the weekend when security forces moved into the old quarter of Bangkok to disperse anti-government red shirt protesters.
Moving in to try to clear the opposition 'red shirt' demonstrators, the army was met with a barrage of rocks, sticks and even petrol bombs.
The show of force failed to budge the red shirts from their stronghold in the city's old quarter, with demonstrators vowing to remain on the streets of Bangkok.
The army says blank rounds and rubber bullets were used and live ammunition was fired into the air. Demonstrators say the live bullets were fired into the crowd.
But the Thai government denies the allegation. The ABC has seen shell casings which appear to be from live rounds.
Meanwhile, the Federal Government has warned Australians in Thailand of the deteriorating situation in Bangkok.
Foreign Affairs Minister Stephen Smith says he is not aware of any Australians being caught up in the violence, but on Channel Nine he warned Australians in Thailand to be aware of the danger.
"We strongly urge any Australians who are in Thailand to avoid demonstrations and to avoid the protests," he said.
"To carefully follow instructions given by the local authorities but to absolutely avoid these centres of protest."
Mr Smith says he is worried about the latest developments.
"We very much want the Thai government and the Thai people to resolve these matters peacefully in accordance with Thailand's democratic processes," he said.
"We certainly don't want to see military intervention but we have become very concerned at the deteriorating situation."
