The Constitutional Court on Wednesday accepted a case lodged by 27 senators who say Yingluck's transfer of the national security chief in 2011 was politically motivated. If she is found to have violated the constitution, the court could remove her from power.
It remains unclear when the court will rule but Yingluck has been given 15 days to defend herself.
"If the prime minister is removed from her position, a power vacuum will occur and chaos will definitely ensue," Foreign Minister Surapong Tovichakchaikul told reporters. "Thais are hot-tempered and a confrontation could take place," .
Over the past five months, protesters have shut state offices and disrupted a February 2 election which was nullified by a court on March 21. They want to remove Yingluck and rid the country of the influence of her brother, ousted former premier Thaksin Shinawatra, to make way for broad political reforms before a new general election takes place.
Protesters have stepped up their activities in recent days, bolstered by a series of legal challenges piling up against Yingluck. "The end game is near! All will be over by the end of April!" shouted one protest leader to thunderous applause at protest headquarters in Bangkok's Lumpini Park.
Twenty-four people have been killed in politically related violence since late November, including a protester shot in the head on Tuesday after weeks of calm in the capital.
Protest leader Suthep Thaugsuban told supporters on Wednesday that the group would step up activities after the Thai New Year, which begins next week and is expected to usher in a few days of calm as people vacate the capital for the provinces.
"Yingluck will not survive, the court will rule against her and, on that day, our opponents will come out (to defend her). I believe after Songkran (the Thai New Year) we must be ready to come out in full force," said Suthep.
With the clock ticking for Yingluck, risk of a confrontation between opposing political sides is high.
Yingluck's "red shirt" supporters plan a big rally on Saturday to counter attempts to remove her from office. Red shirt leaders say they expect around 500,000 supporters from all over Thailand to attend a gathering on the outskirts of Bangkok.
The tension and uncertainty have hit consumption and investment as well as scared some away tourists from the capital of the "Lands of Smiles".
The University of the Thai Chamber of Commerce's consumer confidence index dropped to 68.8 in March from 69.9 in February. The index, which has fallen 12 straight months, is at its lowest since November 2001.
"The consumer confidence index is tied pretty closely with the political situation," said Thanavath Phonvichai, an economics professor at the university. "The Thai economic structure is quite weak and fragile. There's an increasing risk for the economy to expand less than 2 percent, with more possibility of flat growth or a contraction."
The survey showed that readiness to spend on new cars fell to its lowest level in 27 months and on new houses to the lowest mark in 105 months. Thailand is a regional production and export base for global carmakers. Domestic auto sales dropped nearly 45 percent in February compared with a year earlier.
Tourism, which accounts for about 10 percent of the Thai economy, is taking a hit, with arrivals down 7.3 percent in January-March from a year earlier, according to the Tourism Council of Thailand.
But the sector is expected to improve from April, thanks to the mid-March lifting of a state of emergency covering Bangkok.
