East Malaysia consists of the Malaysian states of Sabah and Sarawak, located on the island of Borneo, as well as the Federal Territory of Labuan, which lies off coast of Sabah. East Malaysia lies to the east, across the South China Sea from Peninsular Malaysia (West Malaysia) which is located on the Malay Peninsula. While East Malaysia is less populated and relatively less developed than West Malaysia, its land mass is larger and it has notably more natural resources, which are chiefly oil and gas reserves.

Of note, Sarawak contains the Mulu caves within Gunung Mulu National Park; among these is the limestone cave with the largest chamber in the world, the Sarawak Chamber. The Mulu national park was declared a World Heritage Site in 2001.

Sabah's many attractions include the World Heritage Site Mount Kinabalu, and Sipadan island of which is a world renowned diving hotspot.

The indigenous inhabitants of East Malaysia are fiercely partisan and maintain culturally distinct dialects of the national language, Malay, in addition to their own ethnic languages. Approximately 13% of the population of Sabah, and 26% of the population of Sarawak, is composed of ethnic Chinese Malaysians.

Federation

Both Sabah (formerly British North Borneo) and Sarawak were separate British colonies from Malaya, and did not become part of the Federation of Malaya in 1957. However, both voted to become part of the new Federation of Malaysia in 1963, encouraged by the inclusion of Singapore, which was expelled from the federation in 1965. Previously, there were efforts to unite Brunei, Sabah and Sarawak under the North Borneo Federation but that failed after the Brunei Revolt occurred.

As states of the Federation, Sabah and Sarawak retained a higher degree of local government and legislative autonomy when compared to other states in West Malaysia. For example, both states have separate immigration controls, requiring Malaysian citizens from West Malaysia to carry passports or identity cards when visiting East Malaysia.

The island of Labuan was part of Sabah until 1984, when it was made into a separate Federal Territory, administered by the federal government. It was used to establish a centre for offshore finance, with its own separate tax system and customs.