The group also urged Najib to abolish the much-criticised Internal Security Act (ISA), and to try fairly or release those currently detained under the law.
The ISA, a colonial-era law first used against communist insurgents in the 1950s, allows the government to detain anyone for an initial two-year period without charges, and to extend their detention indefinitely.
The rights group recommended specific reforms in the four key areas of arbitrary detention, censorship, police brutality, and the protection of migrants.
"Prime Minister Najib has a great opportunity to reverse the abusive policies of the past," said Elaine Pearson, deputy Asia director at HRW.
"It's deplorable that Malaysians continue to face arbitrary detention, censorship, and threats to their lives from unaccountable police."
HRW also called on Najib to abolish RELA, the government-funded People's Volunteer Corps, whose members have been accused of numerous rights violations against foreign migrants.
Rights groups have accused the volunteer group, whose members wear military-style uniforms, of using vigilante tactics to beat and intimidate foreign workers, many of whom are legally in Malaysia.
"It's time the Malaysian government delivered on promises to show 'regard for the fundamental rights of the people of Malaysia', so that it is more than just a pretty sound bite," added Pearson.