The healthcare sector in Malaysia is facing many changes and influences that pose new challenges to the government and private healthcare organizations. Malaysia is a dynamic, rapidly progressing, multicultural country and constantly undergoing evolution from every aspect of its development, specifically the healthcare industry. Like many countries in the world, Malaysia is also facing healthcare issues and challenges. These challenges from pre-Independence era have morphed into global issues which are more complicated as the country moves into the millennial age. Inevitably, the healthcare system will collapse in the future unless the government proactively tackles the challenges now. A healthcare system has been defined by WHO as all the activities whose primary purpose is to promote, restore or maintain health. This article has identified the major issues plaguing the healthcare system in Malaysia under the various headings: governance, economic and social challenges. The authors have also put forward various proposals to the meet the challenges.