Thai Deputy Prime Minister Bhichai Rattakul, chairman of the Bangkok Asian Games Organising Committee (BAGOC), told Reuters Saudi officials said they were pulling out because of the approaching Ramadan fasting season and preparations for Saudi Arabia's centenary celebrations.
The Moslem holy fasting month of Ramadan is due to begin around December 20, the last day of the two-week Asian Games. Saudi Arabia's centenary will be celebrated early next year.
The withdrawal is another blow to the Asian Games, which has been hit by Asia's severe economic crisis.
Organisers said 6,745 athletes from 42 nations would participate in the tournament, which is held every four years. They had originally expected more than 8,700 athletes to attend from 43 countries.
Bhichai said Thailand was disappointed by the Saudi decision, since Riyadh had already confirmed the attendance of its team.
"I was shocked and very sad at the announcement," he said. "The list of Saudi athletes and officials had arrived and they are pulling out less than 10 days before the Games are set to start...Since they have made their decision there is nothing we can do to bring them back."
Riyadh had promised to send 66 athletes and 39 officials to participate in seven events: athletics, equestrianism, basketball, fencing, handball, karate and shooting.
Saudi diplomats in Bangkok confirmed the withdrawal but gave no further comment.
Bhichai declined to comment on local media reports that Saudi Arabia had withdrawn as a result of strained relations with Thailand following the murders of several Saudi citizens in the last decade.
But the speaker of the Thai parliament and a prominent Moslem Thai, Wan Muhamad Nor Matha, told reporters he believed the Saudi withdrawal was motivated by the strained relations.
"I think the real reason (for the withdrawal) is because of the unsettled jewellery issue and previous murders of their diplomats," he said.
Relations between the two countries were put under pressure in 1989, when a Thai worker at a Riyadh palace stole $20 million worth of jewellery from the palace and escaped to Thailand.
The worker was arrested and convicted in Thailand but Riyadh complained only 20 percent of the jewellery was returned and a large amount of that was fake.
In separate incidents, three Saudi diplomats were shot dead in Bangkok on the same day in 1990 and a Saudi businessman was abducted and later found murdered in 1991.
Reuters
