Hamilton, who took pole position in last week's season-opening race in Australia, established himself as the favourite to repeat the feat here Saturday by setting a time that was a third of a second quicker than Mercedes' Michael Schumacher and McLaren teammate Jenson Button in the afternoon session.
"It's been a good day for me," Hamilton said. "We've made a few changes to the balance of the car since the last race and I'm much happier.
"Around here, overtaking will be a little more possible than in Melbourne. Nevertheless, starting from the front will still be the best position for the race, and that's what I'll be going for tomorrow."
His time in the morning practice was a tenth of a second better than that in the afternoon, with all teams electing to preserve sets of tires for Saturday and Sunday rather than use them up finding more pace on Friday. Tire degradation is a major issue at tropical Sepang, and fresh tires will be critical in the race.
Mercedes' Nico Rosberg was fourth fastest in the afternoon, ahead of Toro Rosso's Daniel Ricciardo and Ferrari's Fernando Alonso.
The best times were more than 3 seconds off last year's pole position lap, indicating much room for improvement on Saturday.
Red Bull's Mark Webber was seventh on the time sheets, with world champion teammate Sebastian Vettel down in 10th after complaining over the radio about the balance of the car.
Vettel was not pleased with the Red Bull's handling.
"The tires drop off quite quickly here, which is the same for all the drivers, but we are sliding quite a bit and I would like the car to be a bit more stable," Vettel said. "We made a good step today, the potential is there, but we need to get to it."
Toro Rosso's Jean-Eric Vergne was eighth fastest and Lotus' Romain Grosjean ninth. Ferrari's under-pressure driver Felipe Massa, who is using a new chassis at Sepang after his struggles in Melbourne, made no improvement and finished 16th.
McLaren's strong performance Friday, following a 1-2 qualifying effort, pole position, fastest lap and race win in Melbourne, established it as the early championship favourite in 2012.
Hamilton has never won or taken pole in Malaysia, while teammate Button did the double in his championship year of 2009.
The top four cars in Friday's times were Mercedes-powered, but it will likely be tires rather than engines that will decide Saturday's qualifying and Sunday's race.