Malaysian police have intercepted a tanker with 131 Sri Lankans believed bound for Australia and New Zealand, smashing a large people smuggling ring that has been operating for a year, authorities say.

Authorities halted the modified tanker on Tuesday (local time) off the coast of southern Johor state, national police chief Mohamad Fuzi Harun said in a statement.

He said the group included 98 men, 24 women, four boys and five girls.

Police also raided a fishing boat used to transport the Sri Lankans to the vessel and detained three Indonesians and four Malaysians on board, he said.

The tanker was intercepted near kota tinggi in Johor state, Malaysia. ( AP: Royal Malaysia Police )

Another five Malaysians were nabbed for suspected involvement in the smuggling syndicate.

"This syndicate has been operating since mid-2017 and has international connections across Sri Lanka, Australia, New Zealand, Indonesia and Malaysia," Mr Harun said.

A total of 127 Sri Lankans will be charged for entering Malaysia illegally while nine Malaysians, four Indonesians and four Sri Lankans will be investigated for people smuggling, he added.

AP