The same officials suggested Mossad is on a mission to thwart a Hamas project that sends scientists and engineers overseas to purchase intelligence and weapons.
Palestinian group Hamas on Wednesday denied reports about negotiations for a prisoner swap deal with Israel.
Batsh was a lecturer at Universiti Kuala Lumpur, specializing in power engineering, according to the university.
The allegations on Israeli spy agency Mossad of killing a Hamas engineer Fadi al-Batsh has now nearly confirmed.
One official said that Batash had been involved in mediating a massive weapons shipment from North Korea of "communications components used for guided munitions destined for Gaza" which was recently seized by Egyptian authorities.
Fadi al-Batsh, a 35 year old Palestinian academic was shot dead by two gunmen riding a motorcycle while he was heading to mosque in the Kuala Lumpur suburb of Gombak for dawn prayers on Saturday. He was sent by the terror group to Malaysia to research and acquire weapons systems and drones, the report said.
It was thought that Israel released more than 1,000 Palestinian prisoners and Hamas released the Israeli soldier Jilad Shalit, who was captured from his tank on Gaza's borders in 2006.More news: Ghana to pilot world's first malaria vaccine
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Inspector-General of Police Tan Sri Mohamad Fuzi Harun said with the latest development, police believe that the suspect could be still in the country and asked those with information about the identity of the suspect to contact investigating officer ASP Shahrizal Salleh at 017-7134705.
According to the report, Fadi al-Batsh (35), was killed as part of an alleged operation by Israel's Mossad to take out Hamas scientists and engineers training overseas to gather "know-how and weaponry to fight Israel".
Earlier on Sunday, police released the photofit of both suspects describing the duo as 180cm tall, having fair complexions, and one of them possessing a long beard.
Israel has repeatedly distanced itself from suspected Mossad killings, and Defense Minister Avigdor Liberman suggested internal Palestinian disputes sealed Batsh's fate.
Hamas has previously accused the Mossad of assassinating another one of its drone experts - Mohamed Zouari - in Tunisia in 2016.
Mossad is believed to have assassinated Palestinian militants and scientists in the past, but rarely confirms such operations.