While Anwar was in jail for corruption and sodomy offences, his wife, who formed Keadilan in 1999, became a proxy president for Anwar, who named himself the party adviser.
On Friday, the Registrar of Societies rejected his bid to run for party office, upholding the ban imposed in 2003 following his conviction for corruption.
The ban runs until April 2008.
Anwar – seeking a return to active politics after nearly 10 years in political wilderness – said he would face a three-year jail sentence and a $2,950 fine if he defied the ban.
Anwar, a former deputy premier, was charged with corruption and sodomy in 1998, days after he fell out with Mahathir Mohamad, the prime minister.
He called for political reforms and led a campaign of protest that culminated in a popular “Reformasi” movement.
Malaysian law bans criminals from holding public office for five years after their release from jail.
Anwar had effectively served his corruption sentence in April 2003, but remained in jail until he was acquitted of sodomy charges in 2004.