Thousands of visitors had attended musuem in the western state of Negri Sembilan since it launched the ghost and genie exhibition on March 10, due to run until May 31.
Its curator had previously resisted calls from Malaysia's arts minister and a religious leader for it to be shut down amid criticism that encouraging a belief in ghosts was un-Islamic.
But Kamaruddin Siaraf, Negeri Sembilan's state secretary and chair of the state museum board, said the exhibition was terminated after the National Fatwa Council ruled against such events.
He said the decision was made out of respect for the council's views, the state Bernama news agency reported.
Malaysian government officials have already called for a ban another exhibition in a state museum that has put on display decaying objects described as the carcasses of a genie and a mythical phoenix bird.
Last year more than 200,000 people attended an exhibition of about 100 coffins, ghosts and genies that organisers claimed included relics of mermaids and vampires.