Mahathir Mohamad said on Monday that the offer siginified an implicit backing for Israel's aggression in the Middle East.
The government is still awaiting UN approval for the force Israel itself has objected to, as Malaysia does not recognise Israel.
Mahathir, a staunch supporter of the Palestinian cause during his 22-year rule that ended with retirement in 2003, accused the current prime minister Abdullah Ahmad Badawi's government of softening its foreign policy to support the US and Israel.
"America has made it possible for Israel to attack Lebanon and destroy the cities there with weapons supplied by America," he told supporters.
"We are helping to save Israel by sending our troops to curb Hezbollah's activities ... Is our foreign policy veered towards supporting America and Israel? To help Britain and Australia?" he asked.
Malaysia is currently chair of the 56-nation Organization of Islamic Conference, the world's largest Muslim bloc.
Mahathir has clashed repeatedly with his successor in recent months, calling him a liar and pledging to continue a campaign against him.
The national news agency quoted Abdullah, who is currently in Helsinki, as urging the UN to recruit more peacekeepers from Muslim nations including Malaysia, Bangladesh and Indonesia, rather than just taking in European troops.
Indonesia - which similarly has no ties with Israel - has said it will send up to 1,000 troops to Lebanon after Israel dropped its objection to its peacekeepers.