Thailand will lift a nearly two-month-old state of emergency in Bangkok and surrounding areas following an easing of political protests in the capital, a senior official said Tuesday.

The use of emergency rule dealt a heavy blow to Thailand's key tourism industry during what is usually peak season, and also raised fears of a drop in foreign investment.

The state of emergency will be replaced by another special law, the Internal Security Act, with effect from Wednesday until 30 April, the prime minister's secretary-general, Suranand Vejjajiva, told AFP.

"There are two reasons: first the protest situation has eased as protesters are now rallying at only one site. And the second is to improve the climate for business, especially the tourism sector," he said.

He said the decision had been approved by Prime Minister Yingluck Shinawatra at a cabinet meeting on Tuesday.

Yingluck has faced months of street protests aimed at ousting her elected government and installing an unelected "people's council" to oversee reforms.

Political violence, often targeting protesters, has left 23 people dead and hundreds wounded in recent months.

However, attendance at the demonstrations has fallen sharply in recent weeks.

The demonstrators late last month scaled back their rallies, consolidating at one site in Bangkok's Lumpini Park as they ended their so-called "Bangkok shutdown", which had seen them occupy key intersections in the city.

The authorities were unable to use the security powers offered by the state of emergency in any case, after a Civil Court last month ordered the government not to use regulations issued under the decree.

Yingluck's government has suffered a series of legal defeats by the courts, which have been accused by government supporters of colluding with the opposition to try to oust the premier.

Yingluck also faces negligence charges that could lead to her ousting, linked to a flagship rice farm subsidy scheme that her critics say is riddled with corruption.