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Mahathir was once Najib's mentor but he left the former ruling party over the 1MDB affair and joined the opposition. Mahathir was sworn in as prime minister on Thursday, making him the world's oldest democratically elected leader.

"(In) an initial stage, maybe lasting one or two years, I will be the prime minister", Mahathir told a Wall Street Journal conference in Tokyo via a video link from Malaysia.

He added: "I will play a role in the background even when I step down".

Anwar, 70, headed for the royal palace to meet the King after the pardon came through, Xinhua news agency reported.

In 2008, once his ban on political participation was lifted, he was hit with further sodomy charges. Anwar had been serving a five-year prison sentence for sodomy charges he says were politically motivated.

But Mr Anwar, a leading member of the Parti Keadilan Rakyat (PKR) that teamed with former prime minister Mahathir Mohamad to oust scandal-tainted premier Najib Razak, also cautioned that "one election does not a democracy make".

Dr Mahathir had said a 10-person cabinet would be set up first, followed by more ministries and deputy ministers.

"Mahathir has proven his tenacity, accepted his past limitations, apologised and sacrificed his time and energy to raise the dignity of the people", Anwar wrote in the note on May 8. Two photos provided with the report and reviewed by Reuters showed a van with the department's logo and a shopping trolley filled with orange boxes.

Parti Keadilan Rakyat president Datuk Seri Dr Wan Azizah Wan Ismail has been named as Deputy Prime Minister.

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The volatile relationship between Anwar and Mahathir, from friends to foes to allies, has dominated Malaysia's political landscape for more than three decades and is central to the future of the alliance.

Mr Anwar was heir-apparent to the premiership until Dr Mahathir sacked him in 1998 and he was subsequently jailed for sodomy and abuse of power.

Having Anwar and ready to return to active politics "brings stability to the transition", and Weiss suggests that Mahathir may stay in place until a corruption investigation into Najib is underway and the reform process touted in his electioneering begins.

At least six countries, including the United States and Switzerland, are investigating allegations that US$4.5 billion was syphoned off from 1MDB.

"Now there is a new dawn for Malaysia".

Following his release, Anwar said he would give full support to the government led by his ally-turned-foe-turned-ally Mahathir Mohamad, but would not immediately be part of it.

Mr Najib and the fund deny any wrongdoing.

Dr Mahathir personally ordered travel restrictions on Mr Najib on Saturday after news spread that the latter was about to fly off to Jakarta for a break.