Reporters Without Borders, which advocates for free press and free speech, said a government minister announced the plan last week to stop the "spread of negative or malicious content."
"While claiming they do not intend to censor bloggers, they have warned that bloggers are not above the law when they 'disturb peace and harmony,'" Reporters Without Border said in a prepared statement. "This measure could jeopardize online free expression. It could push many bloggers to opt for anonymity or censor themselves out of fear of reprisals."
The group said that recent statements reveal intent to "exercise improper control over the online flow of information."
The statements come as bloggers and journalists face an increasingly difficult climate in Malaysia.
Two journalists in Malaysia were harassed, insulted, threatened, and beaten during clashes between activists and party supporters preparing for elections last week, Reporters Without Borders reported.
Separately, two Malaysian bloggers face libel suits over posts that challenge government and state-controlled media. Reporters without Borders is representing the bloggers -- Jeff Ooi and Ahiruddin Attan.
Sixty-two cyberdissidents have been imprisoned this year, according to statistics from the watchdog group.