Bangkok (AFP) - Thailand's authorities warned Sunday that opposition efforts to hand power to an unelected regime risked unleashing new violence, as rival protesters prepared for a showdown over the fate of the crippled government.

Opposition demonstrators have delivered an ultimatum for a new leader to be appointed by Monday or they will step up efforts to topple a government clinging to power after premier Yingluck Shinawatra was ousted by the courts.

"Forming an unelected government is illegitimate and will bring more conflict and violence," warned Tarit Pengdith, head of the Ministry of Justice's Department of Special Investigation (DSI).

Officials will "step up law enforcement to solve the problems", said Tarit during a televised briefing by the government agency in charge of the security response to the six-month political stand-off.

Fanning tensions, two people were wounded in an explosion, thought to be caused by a grenade, near the government headquarters late on Saturday, officials said.

Yingluck's removal -- for abusing her power with the controversial transfer of a senior security official -- has been denounced by her supporters as part of a "judicial coup".

The kingdom's long-running crisis broadly pits the Shinawatra family and its supporters -- mostly from northern Thailand -- against a royalist establishment with backing in Bangkok and the south.

The opposition says that the remaining caretaker government is no longer legitimate and that elections in the current climate will not solve the stalemate.

It wants an interim premier to be appointed to oversee vague reforms to tackle corruption before new elections are held in about 18 months' time.

The pro-government "Red Shirts", who kicked off a major rally this weekend on the outskirts of Bangkok, have warned that a power grab could lead to civil war.

"We will only stop our protest when justice is served," Red Shirts leader Jatuporn Prompan said on Sunday.

While the two groups of rival protesters have set up their camps in different parts of the capital, officials are on alert for possible clashes between the two sides.

Worsening violence could increase the chances of the coup-prone army intervening again.

- Deep political rifts -

Deep political divisions have riven Thailand since Yingluck's elder brother Thaksin Shinawatra was deposed as premier by royalist generals in 2006.

A military crackdown on pro-Thaksin Red Shirt protests against the previous government left dozens dead in central Bangkok in 2010.

Renewed political violence has left at least 25 people dead and hundreds wounded in gun and grenade attacks by shadowy assailants in recent months, mostly targeting opposition demonstrators.

The anti-government protesters want the upper house of parliament -- almost half of whose members are unelected -- to remove the weakened cabinet, including the caretaker Prime Minister Niwattumrong Boonsongpaisan.

The country has not had a functioning lower house since Yingluck dissolved parliament in December for elections that were later voided because of disruption by protesters.

Surachai Liangboonlertchai, who was appointed by the upper house last week to be the new Senate speaker, said that he would hold an informal meeting with senators on Monday to "find a solution for the country".

In a provocative move, the opposition demonstrators have said they will set up a base inside the government headquarters, which has been besieged by protesters for months and is no longer used by the cabinet.

Thai courts have removed three prime ministers linked to Yingluck's family. Pro-Thaksin parties have won every election completed since 2001 thanks to policies such as universal healthcare, farming subsidies and microcredit schemes.

Thaksin lives in Dubai to avoid jail for a corruption conviction that he says was politically motivated, but he is accused by his opponents of clinging to power through his political allies at home.