The Malaysian government became the second country to halt the importation in early August after Indonesian authorities found a small number of Australian cattle had been detected with the disease.
The Red Meat Advisory Council and National Farmers Federation issued a joint statement at the time, saying the Australian cattle were found to have the disease only after they spent time in Indonesia.
Acting Deputy Secretary of the DAFF Agricultural Trade Group Nicola Hinder said live exports of cattle and buffalo to Malaysia would resume immediately.
"I reconfirm that lumpy skin disease (LSD) has never been detected in Australia and we remain free from the disease," she said on Tuesday.
"Malaysia's lifting of the suspension further highlights Australia's robust systems for the ongoing monitoring of Australia's animal disease status, including LSD."
Indonesia's ban still remains in place and federal Agriculture minister Murray Watt said discussions were ongoing.
"We have always maintained that Australia is free of LSD, demonstrated by the results of extensive testing undertaken across Northern Australia," he said in a statement on Tuesday.
There has never been a positive detection of the disease in Australia.
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