The bill was rushed through Parliament in April under former Prime Minister Najib Razak despite concerns that it would be used to silence dissent ahead of a May 9 general election. It carried a penalty of up to six years in jail and a fine of 500,000 ringgit ($128,000).
Najib's long-ruling coalition was ousted in the polls, ushering in the country's first transition of power since independence from Britain in 1957.
After an intense six-hour debate in Parliament and protest by lawmakers in Najib's party, the law was repealed Thursday with a simple voice vote.
The group ASEAN Parliamentarians for Human Rights hailed the move, saying the law shouldn't have been approved in the first place because it was clearly designed to silence criticism of the government and quell public debate.
"It not only shows that the (new) government is serious about its promises to strip controversial laws from the legal books, it also sends a signal to the wider region that positive human rights change is within reach," its board member, Filipino lawmaker Teddy Baguilat, said in a statement.
He urged Malaysia to follow up and repeal all other repressive laws, including the Sedition Act.
"This must also be a wake-up call for other ASEAN governments to follow suit and ensure their legal codes are not used to restrict human rights," he added.
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