Maria Elvira Pinto Exposto (center) reacts after she was cleared of drug trafficking charges at Shah Alam High Court in Shah Alam. Photo: AFP

An Australian grandmother who said she was tricked into carrying drugs into Malaysia after falling for an online romance scam was Wednesday cleared of trafficking, a crime punishable by death.

Maria Elvira Pinto Exposto wept and hugged her son after being found not guilty of smuggling crystal methamphetamine, a rare outcome in a country where hundreds of people have been sentenced to death for drugs offences in recent years.

"I'm happy now that I'm free," said the 54-year-old, as she was ushered out of the courtroom after the verdict.

But prosecutors have indicated they want to appeal the acquittal, her lawyer said, meaning Exposto won't be able to go back home yet and there is still a chance she could be sentenced to death.

She was arrested in December 2014 while in transit at Kuala Lumpur airport with 1.1 kilograms of the drug stitched into the compartment of a backpack she was carrying.

The mother of four argued she did not know about the hidden stash of "ice." She said she had been fooled into carrying the bag after traveling to China to see someone she met online called "Captain Daniel Smith," who had claimed to be a US serviceman.

Anyone caught with at least 50 grams of crystal meth is considered a trafficker in Muslim-majority Malaysia, and death by hanging is mandatory in the case of a conviction.

However handing down his verdict at the High Court in Shah Alam, outside Kuala Lumpur, Judge Ghazali Cha accepted the defence's argument that Exposto did not know the bag contained drugs and acquitted her.

"I agree with the defence lawyer that the accused did not have knowledge about the drugs," he said.

"I believe that at that time her (Exposto) feelings of love towards 'Captain Daniel Smith' overcame everything, including her own husband, her family and her future."

Exposto's lawyer Muhammad Shafee Abdullah welcomed the verdict but said he was surprised at prosecutors' intention to appeal as the judge had sided firmly with the defence. Prosecutors have 14 days to lodge the challenge.