''This is a slander, it is a malicious allegation and I am not guilty,'' Anwar said from the dock yesterday after being accused of sodomising 23-year-old aide Mohamad Saiful Bukhari Azlan on June 26.

Anwar, a former deputy prime minister jailed a decade ago on sodomy charges that were later overturned, has said the new allegations were concocted by the Government to prevent him from becoming prime minister.

Despite fears he would not be given bail, Sessions Court judge Komathy Suppiah ordered that Anwar could go free on a 20,000-ringgit ($A7000) bond until the next hearing on September 10.

The judge, using Anwar's honorific title, said, ''A man is innocent until proven guilty. I don't think there's any likelihood that Dato Seri Anwar Ibrahim will abscond.''

Sodomy, even between consenting adults, is illegal in this conservative and predominantly Muslim nation, and carries a penalty of 20 years' imprisonment.

Mr Mohamad Saiful has said the act took place at an up-market Kuala Lumpur apartment.

Anwar welcomed the bail decision, which allows him to campaign for the August 26 by-election, and said the prosecution had been ill prepared.

''You can see how haphazard this has been. I am pleased with the decision and will proceed with my campaign.''

His wife, Wan Azizah Wan Ismail, who vacated her parliamentary seat in Penang state to make way for Anwar, condemned the charges as politically motivated and said her husband was innocent.

''It's a big relief that bail has been given. Anwar's health is not too good,'' she said.

Security was tight outside the packed courtroom, which was guarded by about 200 police mostly riot squad officers. About 400 Opposition supporters massed peacefully outside.

Roadblocks were placed across the main thoroughfares leading into the capital, Kuala Lumpur.

The timing of the allegations, after Anwar announced he would oust the Government with the help of defectors when elections had handed the Opposition a third of the seats in Parliament, has raised fears of a conspiracy.

The Asia director of New York-based Human Rights Watch, Brad Adams, said, ''The Malaysian Government appears to be manipulating the legal system to shore up support for its continued rule and undermine the Opposition.

''This case is really about preventing challenges to the Government's rule.''

Human Rights Watch said Anwar's previous trials for sodomy and corruption, which landed him in jail for six years until 2004, ''raised serious concerns about judicial independence and fairness''.

Amnesty International also expressed grave concern over the charges and said they appeared to be an attempt to prevent the 60-year-old Opposition Leader from re-entering Parliament.

Prime Minister Abdullah Ahmad Badawi has denied Anwar's claims that the Government engineered the allegations.

The New Straits Times quoted him as saying, ''How could I insist that he be charged? The police are not so stupid to simply charge if there is no evidence.'' AFP