Thailand has threatened to seal the border with Cambodia in a diplomatic row over former Thai leader Thaksin Shinawatra's role as an advisor.
Thailand has also decided to tear up an oil and gas exploration deal with Cambodia.
Thai Foreign Minister Kasit Piromya said Bangkok had decided to cancel a 2001 agreement to jointly develop a disputed area in the Gulf of Thailand, which was signed during Mr Shinawatra's time in power.
The border warning comes a day after the two countries recalled their respective ambassadors due to the dispute over the appointment of Mr Thaksin, who was ousted in a 2006 coup and lives abroad to avoid a jail term for corruption.
'If Cambodia still adopts a hard line and uncompromising attitude, then we must continue to downgrade relations and maybe seal off all border checkpoints,' Deputy Prime Minister Suthep Thaugsuban said.
There have been no reports of any incidents along the border so far and trading is going on as normal, Mr Suthep said.
Thailand and Cambodia have fought a series of skirmishes since July 2008 over disputed land that surrounds the ancient Preah Vihear Temple on the border.
Thailand boosted security around the Cambodian Embassy after the Cambodian ambassador returned to Phnom Penh this morning.
There have been rallies in recent weeks around the building by anti-Thaksin protestors.
Mr Suthep said Thailand expected Cambodia to reciprocate, adding: 'Thaksin should ask Cambodian authorities to secure the Thai embassy and Thai interests in Cambodia,' he said.
In 2003 Cambodian protestors set fire to the Thai embassy in Phnom Penh, again after both countries recalled their ambassadors in a diplomatic row.
Mr Suthep meanwhile said there were no plans for Thai Prime Minister Abhisit Vejjajiva to meet his Cambodian counterpart Hun Sen when the pair attend a summit of Mekong River basin nations in Tokyo.
There was no immediate comment from Phnom Penh.
The Cambodian government announced the appointment of Mr Thaksin as economics adviser on state television late Wednesday, almost two weeks after Hun Sen first floated the idea at a summit of Asian leaders.
Twice-elected Mr Thaksin remains a hugely influential figure in Thailand, which has been rocked by years of protests by his red-clad supporters and yellow-clad opponents, including rallies that shut down Bangkok's airports last year.
