"The government has tried all along to avoid violence but the protest has developed and they have used actions incompatible with the constitution," Abhisit said in a televised speech.
"Now the government is unable to avoid this state of emergency," he said as the government deployed tanks and armoured military vehicles at 50 key locations in the capital.
Reports say pitched street battle took place between protesters loyal to ex-Premier Thaksin Shinawatra who are demanding the resignation of Abhisit and security forces.
"In the past we have tried to maintain normalcy, but now we must speed up our efforts to restore the situation before it worsens," he said.
Gunfire was heard during a scuffle as Abhisit's car left the Ministry of Interior. Television footage showed protesters smashing the prime minister's car with clubs, iron bars, rocks and flower pots forcing the driver to take evasive action in the compound as protesters blocked all entrances. The car's window was shattered, Thai News Agency reported.
Thai Army spokesman Col. Sansern Kaewkamnerd said the military's presence is meant to restore order, after anti- government protesters stormed into the ministry compound.
Niphon Prompan, the premier's secretary-general, was seriously hurt in the incident and being detained by the protesters, according to Supachai Jaisamut, interior ministry spokesman.
Abhisit escaped unharmed and he later told media persons that he was safe but one of his security guards was nabbed by the protesters.
Earlier, the police arrested Arismun Pongruengrong, a leader of the "red shirt" movement -- named for the colour of their demonstrators' attire. He was charged with inciting people to break the law, the police said.
Arismun led demonstrators who forced their way into a hotel on Saturday where Asian leaders were to meet. The protests prompted the indefinite postponement of the Association of South East Asian Nations summit in the southern coastal city of Pattaya, authorities said.
Union Commerce and Industry Minister Kamal Nath, who was representing the country at the summit, was safe while Heads of states of other member countries were also evacuated to safety on Saturday
