The government will stop subsidising sugar production and drop domestic control of consumer prices for sugar by the end of the year, a Ministry of Agriculture official said on Tuesday.
Brazil challenged Thailand at the World Trade Organization (WTO) in March last year, arguing that Thailand's subsidies for sugar producers have dragged down global prices.
"Our new policy will be to let the price of sugar match that of the global markets whereas before it was under the control of the Ministry of Agriculture," Buntin Kotesiri, administrative director at the Sugar and Cane Producing Board, told Reuters.
"We expect these changes to come into effect at the end of the year during harvesting season."
Mr Butin said the move was in response to Brazil's challenge.
Thailand is the world's second largest sugar producer after Brazil. Brazil said in November that it had seen the proposal for changes in Thai policies and said that it was an acceptable solution.