Abdul Rashid Harun, a regional security commander, said security forces detained 925 people who failed to produce identification or travel documents during the pre-dawn raid in Kampung Air village in Lahad Datu district.
He said security forces also demolished about 400 stilt houses in the village in a bid to curb criminal activities. All those detained will be investigated by the immigration department, he added.
Malaysian authorities have enforced a dusk-to-dawn curfew in several areas in Sabah state since last month to stop intrusions of suspected Filipino militants.
A Malaysian police officer was killed and another officer kidnapped in an attack by suspected Abu Sayyaf rebels in a resort in nearby Semporna town in July.
The kidnapped Malaysian police officer is still being held by the al-Qaeda-linked militants in their hideout on Jolo island in the Philippines, which is about six hours away from Sabah using powerful speedboats.