"I'm ready to resign and dissolve parliament if that is what majority of the Thai people want," she said in a special televised programme to defuse the over two-week long crisis.
She, however, warned that the political crisis would prolong if the protesters reject her offer.
"We should conduct a referendum so that people can decide what we should do," said the 46-year-old prime minister who came to power in 2011.
"We performed our duty in parliament as best we could," Democrat leader and former premier Abhisit Vejjajiva said. "We cannot do any more. We regret that the majority in parliament betrays the voice of the people."
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"House dissolution is one way of returning power to the people. But there must be a solution to make people confident in the election," Abhisit said.
Nine Democrat MPs had already resigned when the massive protests against the government began last month.
Suthep Thaugsuban, a former deputy prime minister and the leader of the anti-government protesters, has called for a final "blow" tomorrow to force Yingluck out of power.
Commenting on the proposed protests, Yingluck said she was ready to listen to the protesters' demands in order to find acceptable solutions, the Nation online reported.
"I'm willing to listen to proposals from the protesters. I'm not addicted to this title," she said.
Suthep, who is facing an arrest warrant for anti-government activities, has said he would turn himself in if the protesters could not topple the government.