The check-in feature allows users to signal to friends that they are safe after an event in their area such as a terror attack or natural disaster.
But it appeared to misfire yesterday, creating an alert called "The Explosion in Bangkok" that said a blast in the capital had been confirmed by "multiple sources".
The page gave no other details about the incident but linked to articles about a bombing in Bangkok in August 2015 which killed 20 people.
"Facebook issued false news that has destroyed Thailand's image," wrote Thai user Prasit Silhanisong.
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"It's close to the New Year and now tourists might not come," he added, calling on the social media giant to apologise.
Facebook swiftly defended the algorithm, saying the alert was activated by reports of small explosives that a protester had thrown near Government House earlier on Tuesday.
The incident, which caused no injuries or damage, was covered in the local press.
It is not the first time the check-in feature has caused controversy.
In March the company apologised after a bug sent a Safety Check notification to users around the world following a deadly suicide bombing in Pakistan.
The social network also faced criticism in November 2015 for selectively activating the feature after attacks in Paris but not in Beirut.
Disclaimer: No Business Standard Journalist was involved in creation of this content