Thousands of protesters have gathered in Malaysia's capital to demand the resignation of Prime Minister Najib Razak over his alleged involvement in a multi-billion-dollar misappropriation scandal.

Clad in yellow shirts, protesters marched from various spots towards the heart of Kuala Lumpur amid tight security.

The mood among those gathered was festive, with drums and vuvuzelas heard along with speeches, songs and chants by participants calling for a "clean Malaysia" and "people power".

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The protest came a day after the head of pro-democracy group Bersih, the organisers of Saturday's rally, was arrested along with several other supporters of the demonstration, including opposition leaders and student activists.

"We are not here to bring down the country. We love this country. We are not here to tear down the government, we're here to strengthen it," Bersih deputy chair Shahrul Aman Shaari told the crowds gathered at the National Mosque.

Another Bersih leader Hishamuddin Rais was arrested on Saturday at the rally, with police also issuing warnings to other participants.

A pro-government group called Red Shirts also rallied on Saturday, marching from the headquarters of the ruling United Malays National Organisation (UMNO) party towards Independence Square.

Police have said both rallies are illegal. State news agency Bernama said about 7,000 police officers would be on duty near the protest area.

Najib condemns 'deceitful' movement

Mr Najib, who is in Peru for the APEC Summit, said the protesters were "a tool of the opposition".

"Their movement is deceitful," he said in a speech uploaded on his website on Friday.

"It is clear that these street protests are in fact the opposition disguised as an independent NGO working to unseat a democratically elected government."

Mr Najib remains in control in Malaysia, despite the scandal. ( Reuters: Olivia Harris, file )

A six-week campaign by Bersih ahead of the rally was marred by several violent confrontations with the Red Shirts, while anonymous death threats have been sent to Bersih chairwoman Maria Chin Abdullah.

Mr Najib's administration has cracked down on the media and civil society in an attempt to silence criticism over his involvement in a financial scandal at state fund 1MDB.

Lawsuits filed by the US Justice Department in July say more than $US700 million ($954 million) of misappropriated funds from 1MDB flowed into the accounts of "Malaysian Official 1", whom US and Malaysian officials have identified as Mr Najib.

Mr Najib has denied wrongdoing, but has taken steps critics say aim to limit discussion of the scandal, such as sacking a deputy prime minister and a former attorney-general, besides suspending newspapers and blocking websites.

Reuters