"The Thai political system has broken down and seems incapable of pulling the country back from the brink of widespread conflict," the Brussels-based conflict resolution group said in a report released late on Friday.
"The stand-off in the streets of Bangkok between the government and Red Shirt protesters is worsening and could deteriorate in undeclared civil war."
Thailand should consider help from neutral figures from the international community, drawn perhaps from Nobel peace laureates, to avoid a slide into wider violence, it said.
Clashes between the military and the red shirts, made up of mostly rural and urban poor, have killed 27 people and injured nearly 1,000 in a seven-week-old drive to force early elections.
Dozens of mysterious explosions have hit the capital, including grenade attacks on April 22 in the business district that killed one and wounded scores.
Bangkok anxiously awaits an army operation to eject the Red Shirts from their tent city, fortified with ramshackle barriers of tires and bamboo poles, which could lead to a bloodbath.
The fault lines are widening between the establishment - big business, the military brass and an educated middle class - and the protesters, many of whom support former Prime Minister Thaksin Shinawatra, ousted in a 2006 coup.
Civil society groups brought the government and the protesters together but the talks faltered over when to hold elections. The red shirts offered a 90-day timeframe, but the prime minister rejected that last weekend.