The agency also said it does not see the decline in energy prices affecting Malaysia's long-term fiscal consolidation.
"The country's strong external position and fairly diverse economy can absorb some weakness in the oil and gas sector," S&P said in a statement today (July 27).
S&P's announcement comes on the back of Fitch Ratings decision earlier this month to revise its Malaysia outlook to "stable".
Although the major oil and gas exporter saw its revenues hit by lower energy and commodity prices earlier this year, S&P said the country's strong external position "can withstand a slowdown in the oil and gas sector over the next two years".
S&P's decision was widely expected and economists said the move was positive and reflects the government's efforts to better manage its economy.
"Combining S&P and Fitch's statements together, it is reinforcing our view that as long as the fiscal reform momentum is intact and there's no change in the regime, we'll continue to see statements supportive of the sovereign rating," said Mr Euben Paracuelles, economist at Nomura Holdings.
The Malaysian ringgit slid to a 17-year low today as it extended declines, making it the worst performing emerging Asian currency this year.
However, S&P said that the weak ringgit would help "boost exports of manufactured goods, and partly offset the impact of lower oil prices in Malaysia's energy exports".