Malaysian Prime Minister Mahathir. Photo: Xinhua

Malaysia's Mahathir Mohamad is proposing to lead a united government and has invited lawmakers from rival political parties to join, political sources said on Tuesday, after his shock resignation as a prime minister.

Mahathir proposed the idea of a grand coalition to leaders of the major political parties he met on Tuesday morning, including those from his recently collapsed coalition and parties they defeated in the 2018 election, sources said.

Mahathir, who at 94 is the world's oldest head of government, stepped down on Monday but was immediately named as interim prime minister by Malaysia's king.

The move effectively broke apart an increasingly fragile coalition Mahathir had formed with old rival Anwar Ibrahim, 72, to win government on an anti-corruption platform in 2018. 

In one of his first acts as interim leader, Mahathir disbanded his entire cabinet late on Monday, opening up political negotiations to form another government.

An official from Mahathir's Bersatu party, which is trying to put together one alliance, said a group of senior members met with Mahathir on Tuesday.

The Democratic Action Party (DAP), part of a rival faction, also said it wanted Mahathir to remain in office.

Whatever the outcome of coalition talks, it will mark yet another realignment of politics just two years after Mahathir made a stunning political comeback to topple former leader Najib Razak and bring down the party that had ruled for six decades - and which he led once.

Mahathir, a former doctor, is credited with transforming Malaysia into an industrial nation from a rural farming backwater when he previously served as prime minister from 1981 until his retirement in 2003.

"Just another day in the office," Mahathir said in a post on his official Twitter account that was accompanied by a series of photos of him delving through paperwork at the prime ministerial desk.