Abdul Razak acknowledged having an affair with the woman and the prosecution contended that he ordered her killing after she pestered him for money.
The trial for Chief Inspector Azilah and Corporal Sirul Azhar, members of an elite police unit, for allegedly carrying out the killing, is fixed for November 10.
"I am not satisfied. My daughter is dead and [Abdul Razak] is free"
Shaariibuu Setev, Altantuya's father
Government prosecutor Abdul Majid Hamzah said he would "consider appealing" against Abdul Razak's acquittal, stressing that "the fight is not over yet".
The remains of Altantuya, who was allegedly shot and blown up with military-grade explosives in October 2006, were found in a jungle clearing just outside the capital, Kuala Lumpur.
The slain woman's father, Shaariibuu Setev, said the ruling was a blow to the credibility of Malaysia's judicial system.
"I am not satisfied," he told reporters. "My daughter is dead and [Abdul Razak] is free.
The case, which has dragged on for almost two years, has drawn intense public interest and detractors have repeatedly tried to link Najib and his wife to Altantuya's death.
Najib is expected to succeed Abdullah Ahmad Badawi, the prime minister, as the leader of the biggest party in the country's ruling coalition in March, and consequently become prime minister.
He has said that he never knew the woman and denied any involvement in the case.
But in June, a private investigator made explosive claims linking Najib to the Mongolian woman, claiming he had detailed information about their relationship which he had given to police but was never raised at the trial.
P Balasubramaniam retracted that statement the very next day and has since been reported missing, with Malaysian police asking Interpol's help to find him.
The case has also landed Raja Petra Kamarudin, a leading Malaysian blogger fiercely critical of the government, in trouble. He is on trial for sedition over an article alleging government links to the murder.