Around 12 hours after the nomination for her candidature was filed before the authorities, the king made a rare intervention by saying that his sister's unprecedented involvement in politics was unconstitutional.
An election commission official said it is reviewing all candidate applications and will finish the process this week, though few expect it to divert from the royal order.
For Thaksin, it amounts to another setback - one of many since he was first removed in a 2006 coup, in part due to accusations of undermining the monarchy. The pair had three children and lived in the United States, but divorced in 1998.
His well-funded political machine returned his allies to power twice, and his maneuvering was seen as the key element in arranging for Ubolratana's selection by a Thaksin-affiliated party.
The Thai Raksa Chart Party has cancelled plans today to launch their election campaign in Bangkok's China Town.
But in a royal statement broadcast on Friday night, King Maha Vajiralongkorn voiced his disapproval, saying members of the royal family should stay neutral and can not take any political positions, otherwise it would be against the constitution and constitutional monarchy.
The party said that it accepted the King's command with full loyalty to the King and all members of the Royal Family.
"Thank you for all the love and encouragement", the princess, who gave up her royal titles to marry a foreigner, said in a typically colourful Instagram post on Friday afternoon. Shinawatra's sister Yingluck was prime minister when the government was overthrown in a coup in 2014.
Since taking the throne in 2016, King Vajiralongkorn has changed rules related to royal powers.
Thai Princess Ubolratana Rajakanya Sirivadhana Barnavadi, seen here in May 18, 2009, planned to run for prime minister but not a seat in parliament, which is allowed under the election law. In general, like most of the royal family, she publicly kept herself aloof from Thailand's recent political turmoil.
"All royal family members adhere to the same principles ... and can not take any political office, because it contradicts the intention of the constitution", Maha Vajiralongkorn said.
After her marriage and 1973 graduation from MIT, she moved with her family to California and used the name Julie Jensen, earning a master's degree in public health at the University of California, Los Angeles. However, an unprecedented move by one royal member has created a political quake in the Southeast Asian nation.
The 67-year-old princess did not address the royal rebuke on Saturday morning, when she thanked supporters on her widely followed Instagram account and said vaguely that she wanted Thailand to "move forward".
2004: Ubolratana's son, Bhumi, is killed in the Indian Ocean tsunami.