The 13-day exercise, codenamed Flying Fish '97, involving 39 warships and 160 combat aircraft, is the most ambitious in the history of the Five Power Defence Agreement (FPDA), the region's only multi-national defence pact involving powers from outside the area.
The pact involves five Commonwealth states. Three outside powers - Britain, Australia and New Zealand - are required to consult on the defence of Singapore and Malaysia.
The region is seen as one of the world's major potential flashpoints. The exercise is taking place only a few hundred miles from the Spratly Islands, variously claimed by China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei.
Malaysia is reducing its defence spending, in spite of its booming "tiger" economy, but takes the possibility of conflict with China over the islands very seriously.
Britain is contributing 3,000 sailors and 16 ships, including the aircraft carrier HMS Illustrious, a nuclear-powered submarine, HMS Trenchant, an anti-aircraft destroyer, HMS Gloucester, two anti-submarine frigates, HMS Beaver and HMS Richmond, and two support ships, Royal Fleet Auxiliaries HMS Fort George and and HMS Diligence.
The British naval force left home in January as part of Ocean wave 97 - a major naval deployment which is visiting 34 countries, with the aim of demonstrating that Britain continues to have security interests in the region after Hong Kong is handed back to China on 1 July. Navy sources said Flying Fish comprised two five-day stages which would put progressively greater pressure on the ships, including submarine and air attacks.
But it would take account of the different environment in the shallow waters off the east coast of Malaysia, about 100 miles north of Singapore, with large numbers of fast patrol boats and missile attack craft.