Malaysia's toppled leader Najib Razak was arrested yesterday and will be charged over allegations that $628 million linked to state investment fund 1MDB ended up in his personal bank accounts, officials said.

Allegations that Najib and his cronies looted huge sums from the investment vehicle were a major factor in the shock defeat of his long-ruling coalition in elections in May, at the hands of a reformist alliance headed by Mahathir Mohamad.

Mahathir, 93, in his second stint as premier after coming out of retirement to take on his ex-protege Najib, has reopened probes into 1MDB that were shut down by the former government, and vowed to bring Najib to justice.

Since losing power, Najib has already been arrested and hit with seven charges related to claims he pocketed some $10 million from a former unit of 1MDB.

However his arrest on yesterday was more significant as it related to a central allegation in the long-running scandal -- that huge sums from the fund flowed into his bank accounts before a hotly contested election in 2013.

The Malaysian Anti-Corruption Commission said in a statement that it had detained Najib as part of its investigations into the fund and "the entry of 2.6 billion ringgit ($628 million) into his personal account".

Najib will appear in court this afternoon where he faces several charges related to abuse of power, the anti-corruption commission said.

James Chin, a Malaysia expert from the University of Tasmania, said Najib's current arrest was "much more significant" than his previous one.

When reports about the bank transfers surfaced in 2015, they represented a turning point in the 1MDB scandal and dramatically raised pressure on Najib and his inner circle.

The attorney-general later cleared Najib of any wrongdoing, saying the money was a personal donation from the Saudi royal family, and closed down domestic investigations.

But as allegations related to wrongdoing at the fund multiplied, the leader lurched sharply to the right.

He sacked critics in government, jailed political opponents and introduced increasingly authoritarian laws that analysts said were aimed at silencing any opposition to his rule.

Najib, his family and cronies were accused of using the stolen cash to buy everything from high-end real estate in the United States to pricey artworks.