Malaysian opposition figure Anwar Ibrahim has been freed on police bail, his lawyers said on Thursday, but they added he could still be charged for sodomy later.

"Anwar has left the building at 9.45 a.m. (2:45 a.m. British time)," R. Sivarasa told reporters outside the police headquarters. "He was driven off in his wife's car through the back exit."

A senior police official confirmed Anwar had received police bail.

"There is no intention to remand him further," said the official who declined to be identified. "Statements were taken and we will have to decide on next course of action."

The former deputy premier was arrested on Wednesday on a sodomy complaint lodged by a former aide and had spent the night in police custody after the authorities remanded him to help in investigations.

Sodomy, even between consenting adults, is a crime punishable by up to 20 years in prison in mainly Muslim Malaysia.

A handful or so of Anwar supporters had gathered outside the police headquarters in the city where he was held despite calls by the party for a strong show of support on Thursday morning. There was minimal police presence.

The Anwar saga has frightened foreign investors who are worried it could trigger a sudden change of government and policy.

"Politics in Malaysia is getting pretty dirty, and that obviously will have a negative impact on foreign investment," said the research head of a local brokerage who declined to be named.

The stock market rose slightly in early Thursday trade, lifted by an overnight rally on Wall Street.

Anwar, a former deputy premier who is having eyeing the country's leadership position after being sacked a decade ago, has said the sodomy allegation was a political ploy aimed at destroying the opposition.

Home Minister Syed Hamid Albar was quoted as saying Anwar's arrest was not politically motivated and the government did not fear a backlash.

"A criminal case was lodged against him and the police have to conduct a thorough investigation to get to the bottom of the allegation," the minister was quoted as saying in a report in The Star newspaper.

"Whatever action being taken is according to the due process of the law."

Anwar's opposition alliance has capitalised on public anger against rising prices and political scandals involving the government to win political mileage.

It needs just 30 more seats to win a simple majority and form the government after it won a record 82 seats in the 222-seat lower house of parliament in the March general election.

Anwar was sacked as deputy prime minister in 1998 and later jailed for corruption and sodomy after leading street protests against then prime minister Mahathir Mohamad's government during the Asian financial crisis.

The supreme court overturned the sodomy conviction six years later.