In a sharp drop from the roughly 140,000 people who attended protests Monday, police said some 7,650 protesters gathered in the capital Tuesday afternoon, calling for the elected government to step down.
The demonstrators are a loosely-allied group united by their animosity towards Thaksin, a billionaire tycoon-turned-politician who was overthrown in a military coup seven years ago but is widely thought to control the government from abroad.
Yingluck, who called an early election on Monday to try to calm the political turmoil, said her cabinet was legally bound to act as an interim government until the polls are held.
"I would like the protesters to stop and to use the electoral system to choose who will become the next government," she told reporters after a cabinet meeting early Tuesday.
A visibly emotional Yingluck - who said she had not discussed with party colleagues whether she would run in the February 2 election - reacted angrily to protesters' calls that her family be removed from Thailand.
"I have retreated as far as I can - give me some fairness," she said.
Rally leader Suthep Thaugsuban has rejected elections and vowed to set up a parallel government that would suspend the democratic system in Thailand and redraw its constitution.