The decision comes after The Herald newspaper and an evangelical church in Borneo presented seperate legal challenges against Malaysia's Prime Minister Abdullah Ahmad Badawi.
The Herald, a weekly Catholic newspaper, publishes some of its material in the local Malay language. In Malay, the word for God is "Allah". However, the Government of Malaysia recently declared that the word "Allah" referred to the Muslim God only and as such could only be used by Muslims.
The Herald was warned that if it did not stop using the word "Allah" in its Malay section then its permit could be revoked.
However, this weekend the government has renewed the paper's 2008 permit without demanding a ban on the word "Allah".
The editor of the paper, Rev Lawrence Andrew told AP, "There are no conditions, there was no mention of the Allah ban."
The government has also been challenged by the Sabah Evangelical Church of Borneo after some its members had children's educational material confiscated for containing the word "Allah". So far there are no reports of their legal challenge being resolved.