Malaysia's Immigration Department announced the travel ban moments after the scandal-plagued Najib said in a Facebook post that he and his family were taking a post-election holiday overseas starting from Saturday and would return next week.
His holiday plans fueled rumors he had been visiting the country to flee potential prosecution over a big corruption scandal but Najib denied that.
On Friday, he held a meeting of top alliance partners as he got down to the business of forming a government that, for the first time in the country's history, would not be from the Barisan Nasional coalition. Confirming the reports on Saturday, Mahathir said that he prevented Najib from leaving the country.
Regarding the new Mahathir Cabinet, it was reported that Parti Pribumi Bersatu Malaysia president Muhyiddin Yassin would be named the home minister, while DAP secretary-general Lim Guan Eng will be finance minister and Parti Amanah Negara president Mohamad Sabu the defence minister.
Mahathir has pledged a full independent investigation into the billions of embezzled funds and many believe this will implicate Najib. The 92-year-old leader was sworn in as Malaysia's seventh prime minister on Thursday.
Mahathir also said he had replaced the country's attorney general, who had cleared Najib of all wrongdoing in the 1MDB scandal.
But anger quickly mounted among social media users who accused the defeated leader of seeking to flee, and the immigration department swiftly announced both he and his wife Rosmah Mansor were banned from leaving Malaysia.
U.S. investigators said Mr Najib's associates stole and looted 4.5 billion United States dollars from the fund, of which some 700 million USA dollars landed in Mr Najib's bank account and some 30 million United States dollars was used to buy jewellery for his wife.
On Friday, two sources told Reuters that Mahathir will appoint a finance ministry adviser to oversee the recovery of billions of dollars allegedly stolen from 1MDB.
Speaking to FMT, Mohamad disagreed with PKR vice-president Rafizi Ramli who said that talks were still pending between Mahathir and PKR de facto leader Anwar Ibrahim over the choice of Cabinet members, saying the matter had been decided at the Pakatan Harapan presidential meeting.
Najib also tweeted that he hoped the "divisive period" in the country's history would end with unity. "What we want is to restore the rule of law. if the law says that Najib has done something wrong, then he will have to face the consequences". I apologise for any shortcomings and mistakes, and I thank you, the people, for the opportunity to lead our great nation.
"We need to do investigations on a lot of things", Mahathir said on Saturday in Kuala Lumpur.