Thaksin Shinawatra looks set for an unprecedented second term

Based on the count so far, his Thai Rak Thai ("Thais love Thais") party is predicted to have won 375 of the 500 seats in parliament.

But no Thai Rak Thai candidates are expected to win in the restive south.

The leader of the opposition Democrats, Banyat Bantadtan said he was stepping down after his party's poor showing.

Despite his victory, Mr Thaksin conceded that the results in the southern provinces were "disappointing", and said the poor showing was "a wake-up call for the government that people are not happy" in the region.

More than 500 people have been killed in southern Thailand since a resurgence of violence which began when Islamist militants attacked an army base in January last year.

Sweeping mandate

If predictions prove correct, Thai Rak Thai should have enough seats in parliament to govern without a coalition.

These results mark a new chapter in Thai democracy Dr Kantathi Suphamongkhon, Thai Rak Thai

Mr Thaksin has already indicated that he is likely to sever ties with the Chart Thai party - which was in partnership with Thai Rak Thai in the outgoing government - paving the way for single-party rule.

The opposition has already raised concerns that Thailand could become a "parliamentary dictatorship" now that Mr Thaksin has been given such a huge mandate.

But the prime minister said it was unreasonable to equate a single-party government with a dictatorship, adding that the election results reflected the democratic wishes of the people.

A founding member of Thai Rak Thai, Dr Kantathi Suphamongkhon, told the BBC that his country's development had suffered in the past from having coalition governments - adding that the weekend's results marked a new chapter in Thai democracy.

He said that under single-party rule, the government would be directly accountable to the Thai people, and would be unable to blame its mistakes on other members of a coalition.

THAI ELECTION 500 posts in House of Representatives 400 chosen from constituencies and 100 from party lists Voting mandatory Economy, southern violence and tsunami relief seen as key issues Election at a glance

According to the BBC's South East Asia correspondent, Kylie Morris, the outcome of Sunday's poll was a devastating result for the Democrats, who had hoped to maintain enough support to restrain Mr Thaksin.

Before announcing his resignation, Banyat Bantadtan admitted that there was no way his party could reach its target of securing 201 seats in parliament - the number required to bring a no-confidence motion against Thai Rak Thai.

Muslim anger

But amid the gloom, the one place the Democrat Party did make gains was in the south of the country.

Election officials said Democrat candidates were leading in all constituencies in the south, with observers saying that many of the region's Muslim voters were angry at Mr Thaksin's handling of the escalating insurgency.

"We knew beforehand that people hate us. Their sentiment against the government is very high," Ariphen Utharaseng, a Thai Rak Thai candidate who lost his seat to a Democrat rival, told the Associated Press news agency.

Thai voters discuss what issues matter most to them. In pictures

According to our correspondent, Mr Thaksin has now become one of Thailand's most powerful modern politicians.

His handling of the 26 December tsunami, and the Thai economy's strong performance, appear to have convinced voters to give him an unprecedented second consecutive term, observers say.

Policies such as providing cheap healthcare, and promises to eradicate poverty across the kingdom, made the telecoms tycoon immensely popular among the poor.

Even more controversial measures, such as the war on drugs in which more than 2,500 people were killed, have had overwhelming popular approval.

Official election results are not expected to be announced until at least Wednesday.