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Jonathan Head in Bangkok: "The question is, what will the army do now?"
The Thai military has imposed martial law amid a political crisis "to preserve law and order", but says the surprise move is not a coup.
In response, the acting prime minister urged the army to act "under the constitution" and "with no violence".
Soldiers have taken over TV and radio stations, and blocked off roads in the capital, Bangkok.
Martial law comes after months of escalating tensions between the government and the opposition.
Correspondents say the move could enrage supporters of the government, especially if it is seen as amounting to a coup. The army has staged at least 11 coups since the end of the absolute monarchy in 1932.
'No need to panic'
Army chief Prayuth Chan-Ocha called on rival parties to talk to each other and resolve the political crisis. Martial law would remain in place until "peace and order" had been restored, he told government officials on Tuesday.
Soldiers have moved into the main government building in Bangkok, which has been unoccupied following months of violent demonstrations by opponents who want to be rid of an administration they say is corrupt.
The military has also ordered media censorship in the interests of "national security".
Both pro and anti-government protesters have been told not to march anywhere in order to prevent clashes.
Analysis: Jonathan Head, BBC News, BangkokThe army insists its imposition of martial law does not amount to a coup d'etat, and it is trying to operate with as light a footprint as possible.
At Government House - the official office of the prime minister and symbolic battleground in this long struggle for Thailand's future - troops were able to retake the building from the anti-government PDRC movement without any fuss, although it is still surrounded by protest tents and stages.
The muted reaction from both sides shows the military's low-key approach is working - for now. Both the government and its red-shirt supporters have accepted the army commander's word, that it is not taking over political power. The PDRC has cancelled rallies planned for Tuesday.
But none of this resolves the intractable political conflict which has afflicted Thailand for eight years. If all the army does is maintain security, the problem will remain unresolved, and governance will be crippled.
If the army tries to impose its own solution though, what at the moment seems like a "half-coup" could well become a complete one, an outcome the red-shirt movement has said it will rise up against and resist.
Martial law was first announced on military-run TV. In its statement, the army stressed that the public need not panic.
The announcement cited a 1914 law that allows the military to intervene during times of crisis.
Thai stocks and the baht currency dropped on Tuesday after the army announcement.
Japan, Thailand's biggest investor, expressed "grave concerns" about the political situation and urged all sides to exercise self-restraint "without using violence".
Thailand's martial law act of 1914- Gives the army chief control without PM's assent
- Grants the military full powers to:
- Summon officials and individuals for investigation
- Search and seize individuals or items
- Order compulsory military service and forced labour
- Prohibit assemblies, media coverage, advertising, public transport
- Destroy "enemy" dwellings and build army barracks anywhere
The caretaker government earlier said it had not been consulted about the army's decision, but insisted that it remained in office.
"Everything is normal except the military is responsible for all national security issues," said chief security adviser Paradorn Pattanatabut.
An army spokesman also said the imposition of martial law would have no impact on the caretaker government.
Power struggleObservers say the deadlock in south-east Asia's second-largest economy has got worse since Ms Yingluck dissolved the lower house of parliament in December, and a court ordered her removal earlier this month for abuse of power.
On Monday, acting Prime Minister Niwatthamrong Boonsongphaisan insisted his government would not resign, resisting pressure from anti-government protesters.
Thailand has faced a power struggle since Ms Yingluck's brother, Thaksin Shinawatra, was ousted by the military as prime minister in a coup in 2006.
Since then, there have been periodic anti-government protests which have turned deadly at times.
The latest unrest began in the Thai capital late last year, with demonstrators blockading several parts of the city.
In response, Ms Yingluck called a snap general election in February that her party was widely expected to win. But protesters disrupted the polls and the election was later annulled.
Are you in Thailand? What's your reaction to this ruling? You can share your views and pictures with us by emailing haveyoursay@bbc.co.uk using 'Martial law' in the subject heading.
Send your pictures and videos to yourpics@bbc.co.uk or text them to 61124 (UK) or +44 7624 800 100 (International). If you have a large file you can upload here.
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