The authorities said police and soldiers battled armed groups who launched co-ordinated dawn attacks at 10 police stations and security checkpoints in the provinces of Yala, Pattani and Songkhla near the Malaysian border.
Officials said the attackers were mostly teenagers, poorly equipped with only machetes and a few guns.
Television footage showed their dead bodies being lifted from pools of blood and thrown unceremoniously into trucks.
The last battle zone was at a mosque outside Pattani provincial town, where 32 'rebels' who had holed up there were killed when troops stormed the mosque - one of the most important in the region - to end a six-hour stand-off.
Army commander General Chaisit Shinawatra said 107 attackers were killed in total, six were injured and 17 were arrested while two soldiers and three police were killed and another 15 security forces injured.
The attacks were the latest in a series of bombings, raids and murders in Thailand's southern provinces, which in the past four months have claimed the lives of some 65 security forces, government officials and Buddhist monks.
Deputy Director of the Internal Security Command, General Panlop Pinmanee, said it was "absolutely certain" Wednesday's raids were mounted by separatists and that they were trained by militant groups operating in the south.
Prime Minister Thaksin Shinawatra said the raiders were attempting to steal weapons, and that he believed they were linked to a group which carried out a January 4 attack on an army depot, killing four soldiers and making off with hundreds of rifles.
"The purpose of the raid was to steal weapons from government security forces which would then have been sold," he said.
But a prominent Thai human rights activist told AFP on condition of anonymity that there were fears the government spread false information about the checkpoints being unprotected in order to lure the rebels out.
"In fact they were very well protected," he said.
Government spokesman Jakrapob Penkair said authorities had not set out to commit "mass murder" but that they had to deal decisively with the unrest.
"The government does not consider this a victory and it is not happy about the large number of people who died. No matter what side they were on they were all Thais," he told reporters.
However, Defence Minister Chettha Thanajaro put a positive spin on the events and the deaths of so many rebels, saying they "would be a positive factor as it could lead to an end to all the turmoil".
He confirmed the militants "complacently" believed security forces were otherwise occupied guarding schools, which had come under attack last week.
Chettha said the military presence in the south would be reinforced with two extra battalions or about 1,000 men. He demanded the insurgents lay down their arms, and invited them to begin a dialogue with the government.
Thailand is a predominantly Buddhist nation but about five percent of the population is Muslim, and most live in the five southern provinces bordering Malaysia.
The tranquil tourist islands of Phuket and Samui are also in the south, but far from the border region that has been plagued by separatist activity for four decades.
A Muslim insurgency raged here until the 1980s, but trouble flared again in recent years, sparking fears militants have been mobilised by foreign terror groups like Osama bin Laden's al Qaeda.
Islamic leaders said they feared Wednesday's unprecedented violence would spark a major deterioration in the south where resentment of central authority already runs high.
"The incident will definitely affect Muslim people's feelings. They will have bad feelings towards authorities and the turmoil will continue," said Abdul Rosue Aree, deputy chairman of the Islamic Council in Narathiwat.
"I am really concerned that the problems in the south will escalate even further".