Former prime minister Najib Razak is being investigated for crimes related to a multi-billion-dollar scandal, and Mahathir expects to charge him shortly.
"I will play a role in the background even when I step down". At 92, he is the world's oldest elected leader.
Jailed politician Anwar Ibrahim will receive a royal pardon on Wednesday, Dr Mahathir said, which will pave the way for the Pakatan Harapan (PH) prime minister-in-waiting to run in a by-election and become an MP.
Mahathir added that Anwar, after his release, would need to seek a seat in parliament and then might be given a cabinet post, but would play the same role in the coalition as leaders of the other three parties in the alliance.
Dr Mahathir, who first led the country from 1981 to 2003 under Umno, is now Prime Minister under an agreement with PH that he would eventually hand over power to Mr Anwar, whose Parti Keadilan Rakyat (PKR) has the most MPs in the four-party alliance. He and his supporters have said the charges are politically motivated by Najib to end his career. Mahathir sacked and jailed Anwar on charges of sodomy and corruption.
The Wall Street Journal (WSJ) online version on Tuesday reported that Dr Mahathir said he would not cut a deal with Najib to retrieve the funds.
Dr Mahathir had personally ordered travel restrictions on Najib last Saturday (May 12) after news spread that the latter was about to fly off to Jakarta for a short break.
In his Tuesday remarks, Mahathir said whether Najib would serve time in jail would depend on the results of a probe into the scandal.
Najib is accused of misappropriating billions of dollars through his pet project state fund 1Malaysia Development Berhad (1MDB), and making deposits into his private accounts worth up to $1 billion.
Mahathir was once Najib's mentor but he the former ruling party over the 1MDB affair and joined the opposition.
1MDB is also the subject of probes in several countries.
Mahathir had said earlier that his government would review the law and may repeal it because it was aimed at curbing dissent.
This article has been adapted from its original source.