Prime Minister Najib Razak vowed in 2012 to abolish the British colonial-era Sedition Act, promising to move away from his regime's authoritarian tactics in a bid to shore up dwindling voter support.
But Najib today told his ruling party's annual congress the law would be retained and even enhanced, apparently bowing to pressure from conservatives who advocate a tougher hand in response to a series of electoral setbacks.
"As prime minister, I have decided that the Sedition Act will be maintained," Najib told delegates from his United Malays National Organisation (UMNO).
Critics accuse the government of using the sedition law to intimidate and silence an opposition movement that is threatening UMNO's hold on power.
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Around three dozen people mostly opposition politicians, including leader Anwar Ibrahim have been investigated, charged or convicted for sedition this year.
The crackdown has been widely condemned by rights groups and criticised by the US Embassy in Malaysia.
Anwar accused Najib of caving to "rightists and racists" in the ruling establishment who are "instilling a culture of fear" in order to cling to power.
"They will use the sedition law to intimidate the legitimate voice of the opposition."
The Sedition Act, imposed by the British to quell a communist rebellion decades ago, outlaws speech deemed to incite unrest, racial or religious tensions, or insult Muslim-majority Malaysia's ceremonial Islamic royalty.
It carries a term of up to three years in jail.
Rights groups also condemned Najib's latest move, with Human Rights Watch calling it a "major reversal on human rights.