Razak argued the law -- on the books since Malaysia gained independence from the British in 1957 -- was used only against people who threatened stability of the country.
"We will amend the act but we want to keep Malaysia peaceful and harmonious," Razak said in an exclusive televised interview with BBC World News.
Among the more controversial aspects of the act are its sections that criminalize speech that engender hatred, contempt or disaffection against the government, or create feelings of ill-will and hostility between races.
Razak said there increasingly is more freedom for people to protest.
"We have removed the Internal Security Act," he said.
"Detention without trial is history in Malaysia. For the first time in Malaysia there is an awful lot of latitude for people to protest against the government."
Razak, whose Barisan Nasional -- National Front - was re-elected in early May but with a reduced majority, denied the Sedition Act was a convenience used to silence political opponents and anti-government protesters.
"If you say something that undermines the stability of the country, then you have to be held accountable," he said.
"[The sedition laws] are there on the basis that I have to protect the peace and stability and harmony in Malaysia. It's a multiracial country and we want Malaysia to continue to be peaceful and harmonious. Certain laws have to be in place."
The government enacted a peaceful assembly act to allow street protests but peaceful protests, he said.
Because Malaysia has had 55 years of peace and stability since independence, Razak said a revolt like the Arab Spring gripping Egypt isn't likely to happen.
"There's good economic progress in Malaysia. People have a lot to look forward to. We don't think there is a basis for people to go out in the street and protest against the government."
The Sedition Act also makes it illegal to question parts of the Malaysian Constitution, especially concerning the Malaysian Social Contract. Article 153 of the Constitution deals with special rights for the Bumiputra -- ethnic Malays and other indigenous peoples who comprise more than half the population.
Opponents and protesters have argued there is much legislation and many policies that discriminate in favor of Malays against the Indian or Chinese populations to win jobs, government contracts and federal subsidies.
"It's not discrimination, it's affirmative action," Razak told the BBC. "We must ensure equitable distribution in the country. If you have a large population, the majority Bumiputra, they are marginalized. That doesn't lend itself to long-term stability. We are saying that positive intervention will lead to a more equitable form of wealth distribution."
He said the government also is looking at assisting lower income people, irrespective of race. "More and more of our policies are based on needs," he said.
Since his re-election, Razak has been outspoken about his concern voting was more than ever along racial lines. He said his government would embark on a national reconciliation program to combat racial tensions.
Razak's Barisan Nasional is a loose coalition of more than 13 small and regional political parties that was formed in 1973. The election in May was the party's 13th consecutive general election victory since Malaysia gained independence from the United Kingdom in 1957.
During the BBC interview, he said the elections were "true, fair and transparent" and no independent or official report has confirmed otherwise. But he said the government is prepared to allow the courts to investigate any irregularities if they believe a case is to be heard.
Last month, the Malaysian Bar Association called for the Sedition Act to be scrapped and not recast as the government's proposed National Harmony Act.
Bar Council Vice President Steven Thiru told The Sun Daily the bar maintains the Sedition Act is an outdated colonial law that is oppressive and draconian.
"There are sufficient provisions in the Penal Code and there is no need to recast the Sedition Act as the National Harmony Act, Thiru said.
"While Prime Minister Razak announced in 2012 the Sedition Act will be replaced by the National Harmony Act, no draft of it has been given to us," Thiru said.
In May, the government denied it had interfered in the case of three opposition leaders and an activist arrested under the Sedition Act.
Police charged those arrested under the Sedition Act, including Parti Keadilan Rakyat Vice President Tian Chua, following their calls for protests against alleged fraud in the national elections. All have been released on bail, The Malaysian Chronicle reported.
Nurul Izzah, also a PKR vice president and member of Parliament, called on Malaysians to "jointly condemn" the arrests. She said the arrests are unjust and dangerous to the country's democracy and to personal liberties.
"Prime Minister Najib Razak should be held responsible for reneging on his promise to repeal the Sedition Act. We are talking about selective prosecution using this archaic and obsolete law against the opposition and dissenters," said Nurul, the daughter of former Deputy Prime Minister Anwar Ibrahim.