The decision appears to prolong the embattled premiership of Mr. Najib, who has struggled to explain why more than $600 million had been transferred to him.
Attorney General Mohamed Apandi Ali told reporters at a hastily convened news conference on Tuesday in the country’s administrative capital, Putrajaya, that he had ordered the anticorruption commission to close the investigation into the money that Mr. Najib received.
Mr. Apandi, who was appointed by the prime minister last year after the previous attorney general abruptly left office, said $681 million “was a personal donation” from the Saudi royal family, the New York times reported.
“I am satisfied that there was no evidence to show that the donation was a form of gratification given corruptly,” Mr. Apandi said in a statement released by the attorney general’s office.
The statement also said that part of the money — $620 million — was returned to the Saudi royal family in 2013 “because the sum was not utilized.”
The attorney general’s remarks were the most explicit on the transfers to date. But no reason was provided as to why the Saudi royal family would send Mr. Najib such a large sum of money.
Mr. Najib’s government has moved aggressively to shut down leaks that led to the investigation. Last year, the police raided the offices of the anticorruption commission, the license of a crusading news organization was suspended, and Mr. Najib purged his deputy prime minister, who had been pressing for further investigations.
At the center of Mr. Najib’s troubles is a sovereign wealth fund called 1Malaysia Development Berhad, or 1MDB, which has the prime minister as its chairman.
The opposition is leading calls for further investigations into the fund’s large debts and opaque transactions involving offshore tax havens.
Mr. Najib has prevailed despite large street protests in August against him and a spirited campaign to unseat him by Mahathir Mohamad, a former prime minister and senior member of Mr. Najib’s party.