Malaysian substitute Ramlan Izzaq Faris was the hero after he scored the winning goal in the 85th minute.
The Tigers drew first blood in the opening 45 minutes, with a strike from skipper Bakhtiar Baddrol, before Thailand equalized through Natarid Thammaroddodpon in the 78th minute.
But it was not enough as Malaysia hit the winner in the 85th minute.
The ability of the Malaysian team to overcome pressure from Thailand was the key to victory, said Malaysian coach Ong Kim Swee.
“It was a very tight match, but fortunately we produced the first goal, which boosted our spirit,” he said after the match as quoted by Antara news agency.
The win sends Malaysia top of Group A with four points from two matches. In the same group, Indonesia has three points from one match.
In a Group B match at the Lebak Bulus Stadium in South Jakarta, Myanmar secured its second win in the group after soundly beating Brunei Darussalam 4-0. Myanmar scored two goals in each half. In its first match, Myanmar defeated Laos 3-2.
Myanmar and Vietnam currently jointly lead Group B on seven points each.
Meanwhile, hosts Indonesia promised its players bonuses if the under-23 team secures the gold medal at the Games. The Indonesian Soccer Association (PSSI) said on Wednesday that it would at least double the bonuses of Rp 200 million per player, as promised by the government.
“We have made our own calculations since the qualification round and they [the bonuses] will increase if the team wins the gold medal,” PSSI official Bernhard Limbong said as quoted by Antara on Wednesday.
He added that bonuses would also be provided for the team’s officials.
After swatting aside Cambodia 6-0 in its first match on Monday, Indonesia is scheduled to face Singapore on Friday.
Elsewhere, Vietnam defeated Timor Leste 2-0 in Group B.
The Timorese have emerged as the dark horse in Group B, overcoming a fast and resolute Brunei side 2-1 on Saturday while edging a confident Philippines side 2-1 on Monday.
The Timorese, considered an easy target at the biennial Games, have thus far delivered some sterling performances. Despite this defeat, they will still feel poised to upset the balance at this year’s SEA Games.