Last Updated: Saturday, 20 December, 2003, 06:21 GMT
The report highlights what it says are problems faced by Malaysian Muslims who wish to adopt another faith or who do not follow Sunni Islam.
The PM told the US to send observers to see people of different faiths worshipping alongside one another.
But opposition leaders say that non-Muslims are discriminated against.
The report from the US bureau of democracy, human rights and labour assesses such freedoms worldwide.
It lists Malaysia as one of nine countries where laws favour certain religious groups and discriminate against others.
It also expresses concern that non-Muslims wishing to build places of worship often face obstacles.
But Malaysia's new PM was unimpressed by the latest US Government assessment.
Mr Abdullah told Washington to send its observers to see how the Muslim-led government marking the festivals of all the countries' religions.
However, the opposition says non-Muslims face discrimination and are kept out of the highest levels of government.
Although they account for more than 40% of the population, none has held any of the most senior ministerial posts for over 30 years.
Malaysia also pursues affirmative action policies, which give economic and social privileges to ethnic Malays who by law have to be Muslim.