In a televised address, Abhisit said the move, which gives sweeping new powers to the security forces to tackle protesters, would help restore order.
He has assigned Deputy Prime Minister Suthep Thuagsuban to head the committee that handles the emergency situation.
"The emergency decree takes effect immediately in and around Bangkok as well as the nearby provinces of Samut Prakan, Nonthaburi, Pathum Thani, Nakhon Pathom and Ayutthaya," he said.
"The emergency law is the tool for the government to improve efficiency when handling the current situation," he said.
The emergency comes hours after thousands of 'red-shirt' protesters marched on parliament - forcing MPs to flee the building. The protesters want Abhisit to resign and call elections.