The Exclusive Economic Zone (EEZ) of Malaysia, particularly within the South China Sea and the Malacca Strait, contains numerous World War II shipwrecks belonging to the Imperial Japanese Navy (IJN). While these submerged vessels are rich archaeological sites, they have recently become targets for rampant illegal salvage operations due to the high value of pre-nuclear low-background steel. This illicit exploitation not only destroys irreplaceable historical data but also desecrates sites considered by Tokyo as sacred “war graves,” thereby threatening the diplomatic equilibrium between Malaysia and Japan. This study investigates the complex intersection of maritime archaeology, sovereign immunity under international law, and bilateral diplomacy. Utilizing a mixed-qualitative methodology, this research combines rigorous archival analysis of maritime legislation—specifically focusing on the ambiguities within the United Nations Convention on the Law of the Sea (UNCLOS 1982) and the UNESCO 2001 Convention—with in-depth interviews. Key stakeholders from the Malaysian Ministry of Foreign Affairs (Wisma Putra), the Embassy of Japan, maritime law experts, and enforcement agencies (MMEA) will be interviewed to gauge geopolitical responses and legal gaps. The primary objective is to map out jurisdictional boundaries regarding Underwater Cultural Heritage (UCH) in the EEZ and to evaluate how unauthorized site disturbances impact Malaysia-Japan relations. The study introduces a novel concept of “Maritime Archaeological Diplomacy” as a mechanism to resolve sovereignty friction. The anticipated outcome of this research is a comprehensive policy framework designed to assist both nations in co-managing these historical assets. By shifting the perspective of WWII shipwrecks from mere historical relics to active instruments of modern geopolitics, this study provides a strategic blueprint for bilateral security cooperation, heritage preservation, and sustainable maritime enforcement.