The Malaysian sports ministry made the announcement on Friday, in a major setback for the quadrennial multi-sport event.

Malaysia was asked to step in after the Australian state of Victoria withdrew as host, citing ballooning costs.

The Commonwealth Games Federation (CGF) had offered 100 million pounds ($A193.54 million) to Malaysia as supporting funds.

Malaysia ruling itself out raises the possibility that the Games may not take place for the first time since being cancelled because of World War II.

The funding offered was not enough, officials said, and Malaysia could not commit to hosting the event at such short notice and with little time to assess the potential economic impact.

"If we had a longer time, we would definitely do it, but because there's such a short time, we definitely can't do it," government spokesperson and Communications Minister Fahmi Fadzil said on Friday.

"When we assessed the viability of hosting the Games, the length of time needed and the cost was seen to be particularly prohibitive."

The issue had received a mixed response in Malaysia amid concerns over spending costs and lack of preparation time.

The Games are typically contested by about 70 countries and territories of the former British empire.

Medals tables have in recent editions been dominated by Australia, England, Canada, India, New Zealand and South Africa.

Victoria's withdrawal had already placed the future of the event in doubt and raised questions about whether a Games with colonial origins was still relevant in the modern era, and over its place in an already packed global sporting calendar.

The Games have struggled to find a willing host in recent years, and five of the past six editions have been held in Australia or Britain.

The English city of Birmingham, which had been due to host in 2026, stepped in to save the 2022 Games after South Africa was stripped of hosting rights over a lack of progress in preparations.

Birmingham's decision to host in 2022 led to the CGF scrambling to find another host for 2026.

Victoria had been the only viable candidate after several other cities withdrew from the bidding process because of cost concerns.

Australian Associated Press