The party allied to ousted and exiled ex-leader Thaksin Shinawatra has won a major victory in Thailand's general election, provisional results show.
With most votes counted, outgoing Prime Minister Abhisit Vejjajiva has conceded victory to his rival, opposition leader Yingluck Shinawatra.
Ms Yingluck, who will become Thailand's first female prime minister, said there was "a lot of hard work ahead".
She is the younger sister of Thaksin Shinawatra, ousted in a coup in 2006.
With 92% of votes counted, Ms Yingluck's Pheu Thai party had won 260 seats, giving it a majority in the 500-seat parliament.
"It is now clear from the election results so far that the Pheu Thai party has won the election, and the Democrat Party concedes defeat," Mr Abhisit said on national TV.
"I will give the chance to Yingluck, the first woman to form a government," he added. "I want to see unity and reconciliation. The Democrats are ready to be in opposition."
After Mr Abhisit admitted defeat, Miss Yingluck was cautious in her response. She thanked Mr Abhisit and said she would wait for the official results to be declared.
"I don't want to say it is victory for me and the Pheu Thai party but people are giving me a chance and I will work to my best ability for the people," she said at her party headquarters.
"I would like to reiterate that we are ready to deliver on all of the policies that we have announced. There is a lot of hard work ahead."
She said her party officials had been in talks with the smaller Chart Thai Pattana party with a view to forming a coalition.
"In the future there are more parties expected to come and work with Pheu Thai," she said.
The BBC's Rachel Harvey in Bangkok says the result is a clear rejection of the military's intervention in Thai politics and a bitter disappointment for Mr Abhisit.
'Voted for change'
Mr Thaksin told the BBC from his self-imposed exile in Dubai that it was clear the Thai people had voted for change.
"They want to see reconciliation, we want to have reconciliation," Mr Thaksin told the Newshour programme.
All parties will have to respect the voters' decision, he said.
Mr Thaksin, whose government was toppled in a military coup in 2006, said the military should also "be listening to what the people think".
Asked whether he would now be returning to Thailand, the former prime minister said he was in "no hurry".
"I want to see reconciliation really happen," he said. "I want to be part of the solution, not part of the problem."
The past few years have seen street protests, airport closures and clashes between the supporters of the two main groups, which our correspondent says have tarnished the country's economy and reputation for being a bastion of democracy in south-east Asia.
Last year, protesters shut down parts of Bangkok for two months in a bid to force the government to resign. When the army stepped in to clear the capital's streets it degenerated into violence, leaving 91 people dead.
Many of the red-shirt demonstrators were supporters of Mr Thaksin.
More than 40 parties fielded 3,832 candidates for the 500-seat lower house of parliament, the House of Representatives.
In a two-tier system of voting, 375 legislators will be elected by constituency, while 125 candidates will be chosen from lists according to the proportion of votes each party receives nationwide on a separate ballot. There are some 47 million eligible voters.
Ms Yingluck is a political novice and analysts say her popularity seems to rest on the fact she is campaigning on the policies of her brother, who many believe is Pheu Thai's real leader.
He is living in Dubai to avoid a corruption conviction.
With Pheu Thai's win all but confirmed, analysts say all eyes will once again be on the military, which has regularly intervened in the political process. Army chief Gen Prayuth Chan-ocha on Thursday stressed that he would stay neutral.
Thailand has had 18 attempted or successful military coups since democracy was established in 1932.