'No unity means no political stability. No political stability means we are all in trouble,' he was quoted as saying by Bernama news agency late on Saturday.
'The Malays (will be) in trouble, the Chinese (will be) in trouble, the Indians (will) also be in trouble,' he told a rally.
Mr Najib said foreign investors would pull out their funds if there was political instability.
'Capital can shift in a blink of an eye. Capital knows no loyalty. If our economy is under pressure, funds will flow (out). That is how sensitive capital movement is in the context of a modern global economy,' he said.
The ruling National Front coalition, led by the dominant United Malays National Organisation (Umno), is contesting critical by-election that will test its popularity since disastrous losses in national polls last year.
Mr Najib, who is Umno deputy president, is leading the charge for the January 17 vote in northeastern Terengganu state.
Recently there have been growing fears over 'Islamisation' of Malaysia and the increasing polarisation of the three main ethnic communities.
About 60 per cent of Malaysia's 27 million people are ethnic Malay Muslims.
The country's minority Chinese and Indians are mostly Buddhists, Hindus or Christians.
Issues related to religion, language and race are sensitive matters in Malaysia, which witnessed deadly riots in 1969.
Malaysia is already tipped for slower growth of up to 3.5 per cent for 2009, well down on earlier projections as the global crisis bites into export demand and foreign direct investment inflows.
Mr Najib urged voters to return the Kuala Terengganu seat to Umno, to ensure racial unity and economic growth.
'If we do make the right decision, our country can disintegrate and we will never be able to pass on this strong Malaysia to our next generation,' he said. -- AFP
JAKARTA - AT LEAST 20,000 Indonesian Muslims staged a peaceful rally on Sunday in the capital to call for an end to Israel's military offensive in the Gaza Strip.
1 killed in sky-diving accident
NARATHIWAT (Thailand) - A 10-YEAR-OLD girl was killed when a military sky-diving display went awry on Children's Day in Thailand, police said on Sunday.
The girl was killed in northeastern Roi Et province on Saturday when an army sky diver taking part in a demonstration for Thailand's national day celebrating children was blown off course and landed on the youngster.
Thais vote in by-elections
BANGKOK - THAIS voted under tight security Sunday in by-elections that will be the first test at the polls for new Prime Minister Abhisit Vejjajiva, whose party is hoping to shore up its shaky coalition.
Voting began at 8am (9am Singapore time) for 29 parliamentary seats, with Mr Abhisit's Democrat Party-led coalition hoping to grab as many as 20 places in the 480-member parliament from the opposition.