Opponents say the legislation, which was passed by the lower house yesterday but still needs the approval of the Senate, would "whitewash" past abuses, including the killing of unarmed protesters.
Some 3,000 protesters had joined the rally held by the opposition Democrat Party by early this evening, police said, with attendance expected to swell as the weekend goes on.
Demonstrators chanting "Government get out!" and waving flags gathered for a third night in the Thai capital as political tensions flared in the turbulent kingdom.
Thaksin, who was toppled in a military coup in 2006, remains a hugely divisive figure in Thailand. His younger sister Yingluck Shinawatra is now prime minister.
An attempt by Thaksin to return to Thailand could inflame tensions in a country with a history of political violence.
But there are doubts that the Democrats can mobilise the same number of supporters as during previous bouts of political unrest.
But Human Rights Watch has said a blanket amnesty would allow officials and protest leaders to go unpunished for alleged abuses.
As well as pardoning people involved in political protests since 2004, the amnesty would also cover those accused of crimes by organisations set up after the 2006 coup, according to a copy of the bill seen by AFP.
Thaksin, the former owner of Manchester City football club, lives in Dubai to avoid prison for a corruption conviction imposed in his absence in 2008. He contends that the jail term was politically motivated.