The New Sunday Times newspaper said the genetically modified (GM) male mosquitoes will be first freed in Ketam island, a fishing village south of Kuala Lumpur, in an attempt to kill Aedes mosquitoes which spread dengue fever.
Environmental groups, however, oppose the plan.
"Like all GM organisations, once they have been released in the wild, how do you prevent them from interacting with other insects and produce mutants which may be worse than the Aedes mosquito," said Gurmit Singh, chairman of the Center for Environment Technology and Development.
Dengue is endemic to Malaysia, which has seen a rise of 16 percent in cases every year since 2003, according to the government.
Fatalities from dengue in Malaysia reached record levels in 2004, when 102 people died.
Health Minister Liow Tiong Lai said in the first three months of 2008, more than 9,800 cases of the mosquito-borne disease were reported, with 25 people killed.
The field trials for the GM mosquitoes will be undertaken by the Malaysian health ministry and British-based Oxiter Ltd, an insect bio-tech company.
The newspaper said lab trials conducted for the first time in the world during the past one year had produced success, and that field testing would begin by early next year.
The technique involves releasing GM-made Aedes mosquitoes to mate with the female mosquitoes of the same type, it said. The lethal genes from the warrior mosquitoes cause the larvae to die.
Only a female mosquito can transmit dengue fever because it has a proboscis that can pierce the skin.