Najib, who is expected to call snap polls within months, also pledged to maintain subsidies on key consumer items and introduce various tax breaks intended to spur domestic demand as a hedge against a feared export slowdown.
The prime minister told parliament the cash handouts would include a one-off payment of 500 ringgit ($158) to lower-income families and a bonus for the country's 1.3 million civil servants equal to half their monthly salaries.
He called the payments to the poor "an unprecedented measure" to help Malaysians cope with rising world prices of food, fuel and other essentials.
The budget is likely the last before Najib calls pivotal parliamentary elections.
A once-insignificant opposition scored historic gains in 2008 polls that saw the long-ruling Barisan Nasional coalition lose its two-thirds majority for the first time, and Najib has battled lately to win back voters.
"In an environment of global uncertainties, the strong support of the people is mandatory for us to become developed and prosper as a nation," Najib, who is also finance minister, told parliament.
With inflation around two-year highs of 3.3 percent in August, cost-of-living concerns loom large with voters.
Opposition leader Anwar Ibrahim -- a former finance minister -- dismissed the handouts as "clearly an election ploy".
"You promise everybody everything on earth, it's completely irresponsible," he said.
Najib's budget promised to maintain subsidies on fuel and food items that his government had earlier moved to scale back in a deficit-reduction drive.
The subsidy cuts had caused a further spike in costs of transport and essential commodities that had already risen along with surging world prices.
Inflation fears have been compounded by worry that exports -- the economy's driving force -- could be hit by the US and European economic woes.
Najib said government workers would get larger-than-usual pay rises, all fees in public schools would be abolished and the government would adjust property transaction taxes in a bid to curb market speculation.
Various tax breaks and other incentives would be extended in a range of industries to stoke both domestic and foreign investment, he added.
Malaysia's economy grew 7.2 percent in 2010 but slowed to 4.0 percent in the second quarter of this year.
The budget maintains an earlier rough government estimate of 5 to 6 percent growth in 2012.
The budget acknowledged Southeast Asia's third-largest economy faced external challenges and forecast export growth slowing to 6.8 percent in 2011 and 6 percent next year. Growth had surged by 15.6 percent in 2010.
Despite the handouts, Najib forecast a 4.7 percent budget deficit in 2012, down from this year's 5.4 percent target.
The ruling coalition has governed Muslim-majority Malaysia since independence in 1957, but the opposition alliance has capitalised recently on concerns over corruption, the economy, and authoritarian rule.
Last month, Najib promised to scrap draconian laws often criticised as tools of repression in a gesture widely seen as aimed at voters.