The location of the demonstration was shifted at short notice by about 1.6km after police deployed in force at the Ratchaprasong Intersection, where tens of thousands of protesters rallied on Thursday.
"It’s clear that Prayuth sees the people as the enemy. And we him," protest leader Panupong "Mike" Jadnok told the crowd.
The ban on gatherings of more than five people was imposed on Thursday after nearly three months of protests that have called for a reduction in the powers of King Maha Vajiralongkorn's monarchy as well as the removal of Mr Prayut.
Police with batons and riot shields rushed to the scene of the new demonstration and closed nearby roads and metro stations.
"We’ve issued warnings against illegal acts," police spokesman Yingyot Thepchamnong told reporters. "After this there will be intensive measures in enforcing the law."
A protest sign read "Release our friends" - a reference to the arrest of more than 40 protesters, including several of their leaders, as a government crackdown has intensified this week.
"I have to fight for my future," said Pin, 22, a university student who declined to give her full name for fear of reprisals.
Prayuth first took power as army chief in a 2014 coup.
Critics say he engineered a general election last year to keep hold of power as a civilian prime minister. He says the election was fair.
Protesters also want a new Constitution, to replace one drafted under military rule.
"I'm not quitting," Prayut told reporters after an emergency Cabinet meeting.
"The government must use the emergency decree. We have to proceed because the situation became violent... It is being used for 30 days, or less if the situation eases."
He warned people not to violate the emergency measures, saying: "Just wait and see... If you do wrong, we will use the law."
Calls have also built up among protesters for reforms to the monarchy, which is accused by protesters of helping to entrench decades of military influence in politics.
Protests have been largely peaceful.
The only specific incident cited by the government for the imposition of emergency measures was one in which Queen Suthida's motorcade was jeered by protesters, but it also said protests were damaging the economy and national security.
Police said on Friday that two men would be charged with attempted violence against the Queen, which carries a possible death sentence, if her life is thought to have been threatened.
Even if not, the charge can mean life in jail.
The UN High Commissioner for Human Rights was concerned about the situation in Thailand, said Ravina Shamdsani Said, a spokeswoman for commissioner Michelle Bachelet.
"We are particularly concerned about the application of serious charges, including the crime of sedition, against individuals for peacefully exercising their fundamental rights," she told a briefing in Geneva.
Parliamentary opposition parties also condemned the emergency measures.
"Pheu Thai Party calls on General Prayut Chan-o-cha and the state officials to lift the emergency decree and to stop intimidating the people in all manners and to release those who were arrested immediately," said the party, which has the most seats in Parliament. - Reuters
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