The surprise runaway winner of Thailand's election, the Pheu Thai party, says it has agreed to form a coalition with four smaller parties.
The party - led by by Yingluck Shinawatra, sister of ousted PM Thaksin Shinawatra - won a clear majority with an estimated 265 seats.
Prime Minister Abhisit Vejjajiva has announced his resignation as leader of the Democrats, which won 160 seats.
The outgoing defence minister said the powerful army would accept the result.
Final results from Sunday's poll are due on Tuesday.
Ms Yingluck, who has no previous political experience, said Pheu Thai and four other parties had "agreed to work together to run the country and solve people's problems".
"The first urgent issue is how to achieve reconciliation," she said.
Thailand has been plagued by internal division since Mr Thaksin was ousted by a military coup in 2006.
This election comes a year after protests against the current government left more than 90 people dead. Many of the demonstrators were supporters of Mr Thaksin.
Critics of Ms Yingluck say she is too inexperienced and is simply a proxy for her brother.
But speaking from Dubai, where he lives in self-imposed exile to avoid a jail sentence for corruption, Mr Thaksin said Ms Yingluck's lack of experience could be an advantage, saying a "clean slate" was useful at times in politics.
Mr Thaksin told reporters he did not want to return to Thai politics as he had been with his party too long.
"I really want to retire," he said.
Mr Thaksin said he was proud of his sister and would give Pheu Thai "whatever advice they may need", but that the Thai people were "in good hands".'Victory of the people'
With nearly all votes counted, Ms Yingluck's Pheu Thai has a clear majority with 265 seats, while outgoing Prime Minister Abhisit Vejjajiva's Democrats have 159.
The coalition will together have an estimated 299 seats, effectively controlling about 60% of parliament.
The election results pave the way for Ms Yingluck, a 44-year-old business executive, to become Thailand's first female prime minister and the fifth person to hold the post since her brother.
As the results emerged on Sunday night, she said it was "a victory of the people" and that her party was "ready to deliver on all of the policies that we have announced".
Thailand's markets rose on Monday morning, but business leaders have expressed concern over whether the country can afford the populist reforms which have been promised by Pheu Thai.
The party pledged to introduce a minimum wage, provide development funds to rural villages, create a high-speed rail network and give every school child in the country a tablet computer.
The BBC's Karishma Vaswani in Bangkok says the coalition announcement is being seen as a clever move in Thailand, as it will make it easier for Ms Yingluck to push through reforms promised during her election campaign and create a sense of stability.
However, there are fears of further turbulence ahead for Thailand, our correspondent says, and concerns of how the influential military might react.
The outgoing Defence Minister, Gen Prawit Wongsuwan, said he had spoken to army leaders who said they would accept the result and had "never entertained any idea of doing anything that will damage the country".
The army chief has dismissed speculation of a military coup but, says our correspondent, Thailand's generals have made such promises before, and much depends on whether Mr Thaksin does decide to stay away.
To his supporters, he is a champion of the disadvantaged who was unconstitutionally forced from power by powerful elites, backed by the military.
To his critics, Mr Thaksin was a corrupt and authoritarian leader who manipulated gullible voters.