Linton Besser and Louie Eroglu approached Mr Najib in Kuching on Saturday to ask him about corruption allegations, which he denies.
The pair, filming for ABC's Four Corners, were released without charge but cannot leave Malaysia.
Australia's foreign minister said it raised concerns about press freedom.
Julie Bishop said Australia had raised the matter with the Malaysian authorities.
"I'm always concerned when there are instances of a crackdown on freedom of speech, in democracies particularly," ABC quoted Ms Bishop as saying.
"I'm also concerned about the freedom that journalists have to carry out their work."
Malaysia's Deputy Prime Minister Ahmad Zahid Hamidi said Malaysia was not obstructing the media, but that foreign media workers "must perform their duties according to the journalism ethics".
'Failing to comply'
Mr Besser and Mr Eroglu had approached Mr Najib while he was visiting a mosque in Kuching, the capital of Sarawak state.
They attempted to ask Mr Najib about a $681m (£478m) payment from the 1MDB state investment fund that he set up to his personal account.
Mr Najib has been cleared of personal wrongdoing by Malaysian prosecutors but a number of international investigations are ongoing.
A statement issued by Malaysian police to news agency Bernama said the two men crossed a "security line and aggressively tried to approach the prime minister".
"Both of them were subsequently arrested for failing to comply with police instructions not to cross the security line," the statement said.
In an email to staff, ABC's director of news, Gaven Morris, said Mr Besser and Mr Eroglu did not believe they had crossed a police line and had not obstructed officials.
He said they had "fully cooperated with the police" and were receiving consular and legal support.
The men been released on bail and had their passports returned, but could still face charges.
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