This study examines the role of Malaysian residential properties in providing portfolio diversification benefits in Malaysian mixed asset portfolios. The mixed asset portfolio comprises shares (represented by Kuala Lumpur Composite Index, Kuala Lumpur Second Board Index, Kuala Lumpur Property Sector Index), bond (represented by Malaysian Government Securities Index) and Malaysian residential properties (represented by the Malaysian House Price Indices for the various house types and geographical locations). The mean-variance framework is used to determine the optimal asset allocations in terms of preferred house types and geographical locations with other financial assets for the 1Q2000-3Q2006 study period. The findings of this study demonstrate that ex-post efficient portfolios typically devote a significant allocation to residential properties (up to 66.68%), which will improve the risk-adjusted performance up to 73.87%. Further improvement of risk-adjusted returns can be achieved (up to 89.79%) by adding one more different residential property class into the mixed asset portfolios that already consists of one residential property class. Investors are also able to construct well diversified mixed asset portfolios by incorporating residential properties from two different districts while achieving higher risk-adjusted performance. This study concludes that there are diversification benefits by incorporating residential properties in a mixed asset portfolio in the Malaysian investment context.