The People's Army to Overthrow the Thaksin Regime shifted their demonstration to Government House on Monday after rallying at Lumpini Park for over two months.
The security guard around the seat of government has been beefed up to more than 1,000 police to keep the peace.
Deputy Prime Minister Pracha Promnok said he had informed Prime Minister Yingluck Shinawatra, who was attending the ASEAN Summit in Brunei, of the invocation of the decree.
The government took action after talks failed to persuade protesters to evacuate their rally site ahead of Chinese Premier Li Keqiang's visit tomorrow.
Interior Minister Charupong Ruangsuwan said the government had to enforce the ISA because Thailand was hosting a foreign dignitary but a group of people were trying to disgrace the administration.
The protest was expected to escalate into a mass rally because the participants were determined to topple the administration and disrupt the work of Parliament, he said.
"They chose this timing because we are receiving a state guest. They intend to embarrass the government," he said.
"Parliament is also deliberating a bill to amend Article 190 of the Constitution and several other important bills. We will not allow them to disrupt the work."