Hotel staff alerted police after a housekeeper received a $500 note tip and found out it was fake when she tried to convert it to local currency at a money changer, Izany said.
The man could be charged for possessing counterfeit money and, if found guilty, face up to 10 years in jail, he said.
The largest U.S. note ever printed was a special edition one for $100,000 in 1934. Bills of $500 were last printed in 1945 and are now no longer in wide circulation, according to the U.S. Treasury Department.
This is not the first time the man has been in trouble with the law in Malaysia, Izany said.
A Malaysian court charged him last week with cheating over the sale of office supplies in 2005 in a separate case. Cheating, or fraud, carries a maximum penalty of five years.
