The government and the Barisan Revolusi Nasional (BRN) have agreed to a 40-day Ramadan ceasefire to show their desire to end the southern insurgency.
The move marks a key milestone in the push to end the nearly decade-long conflict, which has claimed more than 5,700 lives since 2004.
The "violence-free month" began on Wednesday and will end on Aug 18, according to Malaysian security official Ahmad Zamzamin bin Hashim.
Malaysia, the facilitator of peace talks between Thai authorities and the BRN, later released a statement in Kuala Lumpur announcing the deal.
National Security Council (NSC) secretary-general Paradorn Pattanatabut confirmed the statement by Malaysian authorities, adding that the government is deploying more defence volunteers and reassigning soldiers from teacher escort duties in some areas.
All locations in Narathiwat, Pattani and Yala provinces and five districts of Songkhla - Na Thawi, Sadao, Chana, Thepha and Saba Yoi - are included in the ceasefire agreement.
The statement said Thailand and the BRN "will work hard to ensure this year's Ramadan will be a violence-free month to demonstrate the sincerity, commitment and seriousness of both sides in finding solutions to the common problem through the JWG-PDP peace dialogue platform". JWG-PDP refers to the Joint Working Group Peace Dialogue Process on Southern Thailand.
The ceasefire will be the first serious test of the push to end the southern violence at the negotiating table.
Insurgents have vowed to refrain from attacks on security officers, civilians and property, the statement said.
In return, authorities will refrain from "any aggressive actions" and ensure safety for civilians regardless of religion.
"This is a stepping stone to what we want to achieve in the future. If there are no incidents, we can see the light at the end of the tunnel. It will be a precedent, a stepping stone," Mr Hashim said.
The NSC, which leads the government's peace talks delegation, has promised to scale down raids on suspected insurgents during the holy month, which began on Wednesday.
Authorities have also removed a number of roadblocks and the military has withdrawn its personnel from some villages in a bid to ease tensions.
Troop withdrawal was among the list of demands made by the BRN as a condition for reducing violence during Ramadan.
Lt Gen Paradorn said soldiers, however, will not lower their guard at public offices and buildings.
"Certain security measures will be scaled down during the fasting month, such as searches and raids, while security at vulnerable establishments and targets will remain unchanged," he said.
The BRN's pledge to halt violence came a day after a bomb wounded eight soldiers aboard a truck transporting soldiers to protect teachers in Yala's Raman district.
The NSC chief said the BRN accepted blame for the explosion but had assured him that it could control insurgents in the field.
Lt Gen Paradorn expressed confidence the security situation would improve significantly after the BRN's peace pledge.
"There are some limitations that both sides will have to try to address [to reduce violence]. We believe if the BRN, which is a major group, curbs violence, the situation as a whole will improve," he said.
Lt Gen Paradorn noted that some splinter groups were still opposed to the peace talks.
"But I'm convinced the BRN will be able to curb violence," he said. "In the past they never came out and made a clear announcement of their goal."
Pressure will be put on the BRN, he noted.
He said peace talks will continue however even if violence erupts during the fasting month.
"The [ceasefire] intention is good, so the talks will continue. And if violent attacks occur, both sides will work together to determine who is responsible and how they will handle them," he said.
The NSC chief said authorities will not lower their guard because it remains unknown what the situation will be like after the end of Ramadan.
He said Prime Minister Yingluck Shinawatra has been informed of the new development and has asked authorities concerned to maintain their vigilance.
Domeng Majaema, a religious leader at Moo 2 village in Yala's Raman district, welcomed the pledge for peace in the region and hoped that a successful ceasefire could set a precedent for the future.
"I hope this Ramadan month and other periods will not be the same as they used to be. Having talked to other imams, they want peace to return to the area," he said.