Under Mr Anwar,
the so-called People's Alliance coalition had made significant gains and posed
the biggest threat to Malaysia's governing coalition since the country's
independence.
But in the wake of his arrest the three
parties clashed over policies.
Prior to the break up, Prime Minister Najib
Razak's own ruling coalition had been struggling to win back votes.
The dispute began over an attempt by the
conservative Pan-Malaysian Islamic Party (PAS) to enforce a form of Islamic law
called hudud.
The more liberal and ethnic Chinese-dominated
Democractic Action Party (DAP) objected to the move and the two parties voted
to sever ties with one another.
Mr Anwar's multi-faith and multi-ethnic Parti
Keadilan Rakyat (PKR) declared on Wednesday that the alliance "no longer
functions formally."
The future of the opposition is unclear as a
few parties say they will still work with each other and some analysts said a
reconciliation was possible.
Mr Anwar was in February jailed for five years
after losing his appeal on a sodomy charge, which he claims was politically
motivated.
The next general elections are due in 2018.
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