Thai Prime Minister Mr Thaksin Shinawatra, has assumed emergency powers after about 60 militants attacked a town in the largely Muslim far south.
The powers were approved at an emergency cabinet meeting after two policemen were killed and 23 people wounded in last night's attack on Yala.
They allow him to order phone taps, censor news reports and detain suspects without charge.
The "Emergency Powers Law" replaces localised martial law in the three southernmost provinces, where more than 800 people have been killed in 19 months.
"This law will, of course, restrict people's rights and liberty," Deputy Prime Minister Wissanu Krea-ngam said. "It is a law to handle emergency situations that undermine national security and the well-being and safety of the public."
The decree brings responsibility for security directly into the prime minister's office.
Police said that interrogations of arrested suspects suggested that about 60 people were involved in the orchestrated attacks on Yala.