Thai Prime Minister Thaksin Shinawatra handed over power to a longtime friend and fellow police officer Wednesday, less than 24 hours after saying he would step down over allegations of corruption and abuse of power.

Thai Prime Minister Thaksin Shinawatra reacts after press conference at Government House in Bangkok. Thaksin announced he would step down to reunite the country, following weeks of mass protests demanding his resignation and a controversial election which the opposition boycotted.[AFP]

Thaksin made the announcement that Deputy Prime Minister Chitchai Wannasathit would replace him in a speech to supporters outside his Thai Rak Thai party headquarters. The move follows two months of protests calling for his resignation.

"I have decided that if I have to rest to let the country move forward, I want to rest now. I have appointed Chitchai to do my work from now on. I need to rest," Thaksin said.

Thaksin's party won parliamentary elections Sunday, but the opposition boycotted the vote, and early results showed that nearly 40 percent of voters cast protest ballots.

Since he is not a member of parliament, Chitchai is unlikely to remain in the job after lawmakers meets to name a prime minister within 30 days. Thaksin's announcement came despite his assertion Tuesday that he would remain in a caretaker role until parliament met.

"It's not that I'm not willing to fight, but when I fight, the nation loses," Thaksin said. "I don't need to see bloodshed among Thais ¡ª Thai blood must not paint the land of Thailand."

Chitchai, 59, who was recently appointed to oversee security affairs, is a close associate of the prime minister. The two studied together in the United States and both joined the Royal Thai Police department, where Chitchai rose into senior positions.

Thaksin announced his resignation after a meeting Tuesday with Thailand's revered King Bhumibol Adulyadej. It is not clear what, if any role, Bhumibol had in the decision, but Thaksin had said that only the king could force his ouster.

While some opponents praised Thaksin's departure, others remained guarded, fearing he would continue to control the government.

Opposition leader Sondhi Limthongkul, who helped organize rallies that drew as many as 100,000 protesters against Thaksin, said that if the prime minister continues to dominate the government through proxies, his People's Alliance for Democracy will protest again.

Pipob Thongchai, another alliance leader, said a final demonstration planned for Friday would go forward. Demonstrators who had camped in front of Government House for weeks were packing up and moving out Wednesday.

Thaksin said his party on Sunday won 57 percent of the popular vote and virtually all 500 seats in Parliament, but official results had not yet been announced. Roughly 37 percent cast a protest ballot for no candidate, according to preliminary results.

By-elections in 38 constituencies left with no winning candidate were scheduled for April 23, but the main opposition Democrat Party said Wednesday it would boycott that contest as well.

"We will join elections once there have been political reforms," the party's deputy leader Sathit Wongnongthoey said.

Thaksin's announcement late Tuesday drew cheers by more than 1,000 anti-government protesters camped outside his office, watching the speech on a large TV screen.

But supporters of Thaksin, who enjoys strong support in rural areas in part because of his generous social welfare and economic assistance programs, were upset.

"He's fought against drugs. He's fought the mafia," said one Bangkok taxi driver, wiping away tears. "I'm very sad."

Thaksin was the second Thai leader to step down under pressure in the past decade and a half, but this time without bloodshed. In 1992, demonstrators against a military strongman were gunned down before the king stepped in to end the fighting and usher in a period of stable democracy.

Opposition to Thaksin gained momentum in January when the prime minister's family announced it had sold its controlling stake in telecommunications company Shin Corp. to Singapore's state-owned Temasek Holdings for a tax-free $1.9 billion.

Critics allege the sale involved insider trading and complain a key national asset is now in a foreign government's hands.

Thaksin also has been accused of stifling the media and mishandling a Muslim insurgency in southern Thailand that flared under his rule.