The announcement, however, made no impact on the protesters as thousands of them resumed their march to the Government House in the capital, the Bangkok Nation reported.
In her announcement, Yingluck said she had sought the Thai monarchy's approval for dissolving the lower house of Parliament and to return power to the people to end the current crisis through new elections. The date of the elections would be announced soon, she said.
In a broadcast to the nation, she said the government led by her Pheu Thai party has tried hard to settle the conflict. She said the anti-government protesters, however, were making demands that cannot be allowed under the country's laws and Constitution.
She said as the protesters were claiming to represent the people, "the best way is to give back the power to the Thai people and hold an election," the Nation reported.
Monday's developments came the day after all 153 lawmakers from the opposition Democrat Party resigned.
Democrat Party leader Abhisit Vejjajiva told a news conference Sunday his party could no longer wait for the government to take responsibility for its past actions, the Post reported.
The Nation quoted protest leaders as saying the dissolution of Parliament was meaningless as the Yingluck government would still continue as an interim government. Instead, they insisted on setting up a "people's council" to ensure the former regime of Yingluck's brother, Thaksin Shinawatra, and his supporters do not come back.
The protesters have maintained the Yingluck government is controlled by the former premier, a telecommunications billionaire who was ousted in a coup in 2006 and who has lived in exile since.
Thaksin is accused of influencing policies through his sister's government. The government has denied those allegations.
The protests recently turned violent, resulting in the deaths of at least three people.
The protesters are particularly upset over the Yingluck government's failed attempt to pass an amnesty bill they saw as paving the way for the return of her brother, who still enjoys much support in the country's rural areas.
On Monday, the protesters were marching toward the Government House in Bangkok from eight different routes.
The Nation reported a convoy of motorcyclists was leading them and several people along the way joined the procession.
Since the demonstrations began, the protesters, led by former Democrat party deputy premier Suthep Thaugsuban, have occupied a number of government ministries and offices.
There was a break in the protests last week so people could take part in the celebrations marking the 86th birthday of their highly revered King Bhumibol Adulayadej.
Yingluck has refused to step down. Earlier, her government which enjoys a majority in parliament easily defeated a no-confidence motion.