The Ineos Grenadiers rider is racing in Italy to prepare for his leadership duties at the Giro next month, which his now major goal after missing the Tour de France.
Thomas was amongst the strongest riders on stage three in Tirreno, a testing day from Follonica to Saturnia with one major climb in the final and an uphill finish.
The Welshman was at the front of the race on the Poggio Murell (1.6km at 10.8 per cent), before Michael Woods launched his attack on the steepest slopes and went on to take the stage.
Thomas finished with the nine-rider chasing group, 20 seconds behind the winner, and moves up into fourth place overall.
Speaking after the stage, he said: “I think I’m a lot better than where I was three weeks ago. I think this race will do me the world of good now to really move me on that a little bit more and be ready for the Giro.”
Thomas is missing the 2020 Tour de France as he said he didn’t want to ride in a support role at the race, but instead wanted to fight for his own chances at Grand Tour victory.
The 34-year-old was also struggling for form at the Critérium du Dauphiné, where he finished 37th overall.
But he looks to be coming back to his best, as he sits just 30 seconds off the race lead in Italy with the toughest mountain stages still to come.
Reflecting on stage three, he said: “It was a tough day altogether.
“We did the finish climb the first time and then everyone stopped riding with us so me and Froomey had a quick chat and we were just like ‘we’re not just going to drag everyone along, we’re not the favourites here.’
“The last climb was really hard. Woodsy kicked with 500m to go and I was close to the limit there. I didn’t want to go all the way into the red because I probably wouldn’t be able to come out of it, especially with the heat, so I drifted back a little and stayed in that group.”