Mr Suthep wants to invoke Section 7 of the constitution, which would lead to the installation of a royally appointed prime minister.
The controversial people's council idea of the ex-Democrat MP has already taken heavy flak from the government, which has called it unconstitutional.
Addressing supporters at the government complex on Chaeng Watthana Road yesterday evening, Mr Suthep said if and when the so-called "Thaksin regime and this government are wiped out", then sovereign power will return to the people as stipulated under Section 3 of the constitution.
"Thaksin regime" is the term used by anti-government protesters to refer to the influence of ousted premier Thaksin Shinawatra on Thai politics.
Section 3 says sovereign power belongs to the Thai people, and the King as Head of State shall exercise such power through parliament, cabinet ministers and the courts in accordance with the provisions of the constitution.
Mr Suthep said people from all walks of life will then choose representatives from various professions to form the people's council to work out policies and draw up legislation.
The council, he added, will act as the legislative assembly to amend laws and regulations and also push national reform to change Thailand for the better.
He said the council will select "decent people" with no affiliations to political parties to be an interim prime minister and form an interim government under Section 7 of the charter.
The interim government will then put the council's national reform policy into practice such as by implementing plans to revamp the structure of the police force so they come under the people's supervision and decentralising power to provincial governors, Mr Suthep said.
When the national reform plans are carried out successfully, a general election will be called and the people's council will end its role, Mr Suthep declared.
Invocation of Section 7 had earlier been widely lambasted by critics and academics when Democrat leader Abhisit Vejjajiva proposed invoking the section to install a royally appointed premier to end the political stalemate following the mass rallies of the People's Alliance for Democracy to oust the Thaksin Shinawatra administration in 2006.
They said such a move would obstruct and destroy democracy, causing the country to fall decades behind.
In the afternoon, Mr Suthep said the fight by anti-government protesters will carry on, despite what he called a "partial victory" at Government House and the Metropolitan Police Bureau (MPB) headquarters yesterday.
Crowds of protesters were allowed to enter both compounds unopposed after police were ordered to stand down in a bid to prevent further violence.
The protesters given access to Government House and the MPB staged a symbolic occupation for several hours and later withdrew to their camps, mainly around Democracy Monument and Ratchadamnoen Avenue.
"We can celebrate, but please do not get carried away," Mr Suthep said.
He said Prime Minister Yingluck Shinawatra and her government remain in power, and that the rallies must continue until the "Thaksin influence" is uprooted from the country.
He hopes they will return after His Majesty the King's birthday celebrations tomorrow.
In a speech broadcast late yesterday afternoon, Ms Yingluck said she believes the country can find a way out of the political crisis.
She called on all sectors and academics to participate in a "people's forum" to find a way out of the deadlock.
The prime minister said that even though the situation has not yet returned to normal, tension and confrontation have eased since the height of the violence on Sunday.
She also called on the nation to unite and join the celebrations to commemorate the King's birthday.
Supreme Commander Thanasak Patimapagorn will call a meeting of armed forces leaders after the royal ceremony marking His Majesty's birthday to discuss ways of solving the current conflict, air force chief Prajin Jantong said yesterday.
ACM Prajin called on the public and state officials to heed His Majesty's advice for them to be the main force of the land.
He believed the situation would eventually be resolved without bloodshed.
Unlike the two previous days when protesters were repelled with tear gas, high-pressure water cannon and rubber bullets, protesters yesterday were met with no resistance from police.
They were allowed to walk into the MPB and Government House unopposed following Mr Suthep's announcement on Monday night that the protesters must successfully seize the MPB the following day.
MPB chief Khamronwit Thoopkrajang ordered officers not to resist the advance of demonstrators.
The city police chief also handed over 2 million baht to the police deployed to guard Government House, and Chamai Maruchet and Orathai bridges.
Those stationed at Karn Ruan intersection and Wat Benchamabophit intersection received 1 million baht.
The officers were told the money had been given by Ms Yingluck.