"We stress the importance of timely exchange of intelligence," Najib said at a joint press conference with Philippine President Benigno Aquino after a meeting in Malaysia's administrative capital.
"In this regard, we are looking at the possibility of establishing a hot line between our security forces in the event of any security incident happening. We need to ensure immediate interdiction by our Malaysian side as well as the Philippines."
In February last year, a Filipino armed group calling itself the "Royal Army of the Sulu Sultanate" crossed by sea from the southern Philippines and landed in Sabah's northeastern Lahad Datu district, demanding that Malaysia recognise its historical rights over part of Sabah.
The ensuing firefight left 70 Filipino militants and 10 Malaysian police and army personnel dead.
"Once you have peace and security, trade will flourish in the southern Philippines as well as Sabah," Mr Najib said.
The Malaysian and Philippine leaders also discussed development of the Mindanao region in the southern Philippines following a breakthrough peace deal between the Moro Islamic Liberation Front and the Manila government.
Malaysia has acted as a broker in the peace talks since 2001.
Mr Najib said a comprehensive agreement will be signed by the end of March, adding that he has been invited by Mr Aquino to Manila to witness the signing ceremony.
The two leaders also touched on the South China Sea territorial dispute with China.
Mr Aquino said in the press conference that both he and Mr Najib agreed on a "peaceful settlement of disputes" with regard to the South China Sea.
"We believe that adherence to the rule of law, positive engagement and sincere dialogue are fundamental if we are to build a truly prosperous and peaceful Southeast Asia — a Southeast Asia where no one is left behind," Mr Aquino said.
There has been increased tension in the region over China's naval assertiveness in the South China Sea.
Besides Malaysia, the Philippines and China, Brunei, Vietnam and Taiwan also have competing territorial claims in the South China Sea.
Asean has been pushing China to adopt a code of conduct for the South China Sea that will help reduce the risk of conflict.