The so-called Friends of Newin faction said it will support Somchai, brother-in-law of ousted prime minister Thaksin Shinawatra, for prime minister.
The change of position came on Tuesday after the faction, representing about one-third of its lawmakers had refused to endorse Somchai on Monday, saying his family ties to Thaksin would incite protesters who have occupied the main government compound for three weeks.
Boonchong Wongtrairat, a faction's member, said the party's differences had been settled.
"We have resolved to support Somchai after the party executives listened to our concerns. We are ready to comply with the majority" in the party, Boonchong told reporters.
"Somchai must announce in parliament how he will reduce conflicts and tensions in Thailand, how he will achieve national reconciliation and how he will preserve the constitutional democracy with the monarch as head of state," he added.
Boonchong also said Somchai should not attempt to use his ties with Thaksin for political benefits.
Somchai, brother-in-law of Thaksin is now set to be backed by the PPP's five coalition partners at a meeting later Tuesday.
Parliament is set to vote on the prime minister on Wednesday.