Prayut had been widely expected to leave his Palang Pracharath Party (PPRP), which leads the ruling coalition.
PPRP has announced its leader and acting deputy PM Prawit Wongsuwan will be the party’s candidate in the election.
Prayut and Prawit both served in Thailand’s military and their political fortunes have been intertwined for decades.
Prayut said that the ties between the two remain strong despite the separation of their political paths.
In September, the Constitutional Court ruled Prayut’s eight-year term limit as PM would end in 2025.
The date of the election has not been decided, but if it is not dissolved early, parliament will end its term in March, setting the stage for a vote in May.
Opposition party Pheu Thai is riding high in the polls but the current Thai constitution, drafted under military rule, stacks the system in favour of army-linked parties.