Prime Minister Najib Razak said Malaysia would repeal its dreaded colonial-era Sedition Act, which critics charged was abused to curb dissent, as the country heads for a tightly-fought election.
Najib said late Wednesday the act represented a "bygone era", and would be replaced by a "National Harmony Act" as part of a drive to allow greater freedoms.
"The new act will safeguard the right to freedom of speech while protecting national unity by preventing the incitement of religious or ethnic hatred," he said.
But the opposition poured cold water on his plans, saying recent dismantling of security laws had not resulted in greater freedoms for Malaysians, citing a police crackdown on peaceful demonstrators in April.
Malaysian authorities had justified the use of the legislation, which includes the threat of jail, as vital to curbing comments or actions that could stoke racial conflict in the multicultural nation.
Since 2008 elections in which the opposition made huge gains, there has been mounting pressure on Najib by rights groups and the opposition to remove such laws in Malaysia, which has been long-known for its authoritarian rule.
Najib, who came to power in 2009, has repealed two other laws, including the requirement for newspaper owners to renew their printing licences annually, to bolster support for his ruling coalition.
Earlier this year he replaced the 1960 Internal Security Act (ISA) to curb the use of indefinite detention without trial, although critics have argued the new law is little or no better.
The opposition alliance seized power in five states in the 2008 elections for their best ever result, stunning the Barisan Nasional coalition which has ruled Malaysia for half a century.
Najib must call polls by March next year. The opposition led by Anwar Ibrahim has set its sights on wresting power from Najib's ruling coalition.
Najib announced the repeal of the Sedition Act during a speech at the attorney general's chambers.
"(The) Sedition Act represents a bygone era in our country and with today's announcement we mark another step forward in Malaysia's development," he said.
But the opposition quickly condemned Najib's reform agenda.
MP Nurul Izzah Anwar -- the daughter of opposition leader Anwar Ibrahim -- said Najib's promise to abolish the sedition law "smacks of hypocrisy when it is slated to be replaced by the National Harmony Act".
"Clearly, Najib had proven himself to be a false democrat when one takes a closer look at his list of false reforms," she said, describing the replacement for the ISA, the Peaceful Assembly Act, as equally draconian and arbitrary as its predecessor.
The new law was being used to persecute her father for participating in an April mass rally for electoral reform, she said.
Anwar is facing three charges under the law, including encouraging a "riot" during the rally, which could see him jailed and barred from politics -- although he could still run on appeal.
Veteran opposition MP Lim Kit Siang of the Democratic Action Party urged the government to drop sedition charges against opposition leaders to prove Najib's move was genuine.
The Sedition Act had been abused to criminalise dissent and penalise opposition personalities, he said.
Najib, who aims to turn Malaysia into a "developed nation" by 2020, said the new National Harmony Act would nurture mutual respect among the various races, which was vital for stability.
During the rule of Najib's father Abdul Razak as prime minister, Malaysia experienced deadly racial riots known as the May 13, 1969, tragedy.
A total of 196 people were killed and hundreds wounded in clashes triggered by a procession by the Chinese-led opposition parties, who were celebrating a strong performance in elections a few days before.
Their Malay opponents planned their own parade, and rumours of racial violence sparked tit-for-tat killings that quickly spun out of control. A state of emergency was declared and it took months for the tensions to ease.