The alleged extremists, mostly Filipinos, are also accused of trying to help fighters linked to the Islamic State (IS) group travel to the Philippines to join up with militants there, they said.
The southern Philippines has long been a pocket of Islamic militancy in the largely Catholic country. A long siege in Marawi, the country's main Muslim centre, sparked fears IS was seeking to establish a foothold in the region.
Malaysian police made the arrests in January and early February in Sabah state on the Malaysian part of Borneo, not far from the southern Philippines. Borneo is a vast island shared between Malaysia, Indonesia and Brunei.
"Early information obtained from the 10 suspects caught in Sabah revealed an attempt by the Abu Sayyaf terrorist group to set up a cell in Sabah," he said.
One of those arrested was a 39-year-old believed to have received orders from a senior militant leader in the southern Philippines to bring IS members from the city of Sandakan in Sabah to join militant groups.
The other three detained were Malaysians, police said. Officials did not disclose the suspects' identities.
Malaysia has rounded up numerous suspected militants in recent times as fears grow that the influence of the IS group could encourage extremists to launch attacks in the Muslim-majority country.
Abu Sayyaf, originally a loose network of militants formed in the 1990s with seed money from Osama bin Laden's Al-Qaeda network, has splintered into factions, with some continuing to engage in banditry and kidnappings.
One faction pledged allegiance to IS and joined militants in the siege of Marawi, which claimed more than 1,100 lives.
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