Secularism—that is, the separation of religion from civic affairs and the state—has been a controversial concept in Islamic political thought, owing in part to historical factors and in part to the ambiguity of the concept itself. In the Muslim world, the notion has acquired strong negative connotations due to its association with removal of Islamic influences from the legal and political spheres under foreign colonial domination, as well as attempts to restrict public religious expression by some secularist nation states. Thus, secularism has often been perceived as a foreign ideology imposed by invaders and perpetuated by post-colonial ruling elites, and is frequently misunderstood to be equivalent to irreligion or anti-religion.

Especially in the late 19th to mid-20th century, some Muslim thinkers advocated secularism as a way to strengthen the Islamic world in the face of Russian, British and French colonialism. Some have advocated secularism in the sense of political order that does not impose any single interpretation of sharia (Ali Abdel Raziq, Mohamed Arkoun, and Mahmoud Mohammed Taha); argued that such a political order would not/does not violate Islam (Abdullah Saeed); and that combined with constitutionalism and human rights, is more consistent with Islamic history than modern visions of an Islamic state (Abdullahi Ahmed An-Na'im). Orthodox Islamic scholars and proponents of Islamism (political Islam) strongly oppose limiting Islam to matters of personal belief, and also strongly advocate for an Islam that encompasses law, politics, economics, culture and every other aspect of the lives of its citizens. Islamist pioneer Abul A'la Maududi claimed that the goal of secularists was not to ameliorate tensions and divisions in multi-religious societies, but to avoid the "restraints of morality and divine guidance", and thus eliminate "all morality, ethics, or human decency from the controlling mechanisms of society".

A number of pre-modern polities in the Islamic world demonstrated some level of separation between religious and political authority, the loss of power of the caliphate being a major reason for that, even if they did not adhere to the modern concept of a state with no official religion or religion-based laws. Today, some Muslim-majority countries define themselves as or are regarded as secular. Many of them have a dual legal system in which Muslims can bring familial and financial disputes to sharia courts whose jurisdiction varies from country to country but usually includes marriage, divorce, inheritance, and guardianship.

Secularism is an ambiguous concept that can be understood to refer to a number of policies and ideas—anticlericalism, atheism, state neutrality toward religion, the separation of religion from state, banishment of religious symbols from the public sphere, or disestablishment (separation of church and state, although Islam has no institution corresponding to this sense of "church"). Secularism has been categorized into two types, "hard" or "assertive" and "soft" or "passive"—"hard" being irreligious, considering religion illegitimate and seeking to discourage and weaken religious faith as much as possible (an example being found under Communist governments); "soft" secularism emphasizes tolerance, and neutrality and seeking to exclude "the state from any involvement in doctrine", and exclude "upholders of any doctrine from using the coercive powers of the state.

There is no word in Arabic, Persian, or Turkish corresponding exactly to the English term "secularism". According to Mansoor Alam, the "common and prevalent" translation of secularism in the four main languages of Muslims—Arabic, Persian, Urdu —is ladeenia or ghair-mazhabee and mulhideen which means "without religion" or "non religious". Alam protests that contrary to these translations, definitions of secularism found in "western languages" all indicate that secularism "does not mean anti-religious or anti-God", but has come to mean freedom of religion and non-interference by the state in religion and vice versa. Nader Hashemi writing in The Oxford Encyclopedia of the Islamic World, gives two more words commonly used as translations in Arabic : ʿilmānīyah (from the Arabic word for science) and ʿalmanīyah (apparently derived from the Arabic word for "world"). (The latter term, first appeared at the end of the nineteenth century in the dictionary Muhit al-Muhit written by the Christian Lebanese scholar Butrus al-Bustani.) In Persian, one finds the loan word sekūlarîzm, while in Turkish both laiklik (borrowed from the French laïcité) and sekülerizm are used to define the term; although both can differ in definitions within Turkish literature, due to the confusion caused by the uncertain and incorrect usage of these two words, the meanings differ depending on context and the source.

According to Mansoor Alam (who dismisses "hard secularism" from consideration as a policy for Muslim governments), Quranic verses that "clearly and unambiguously" support freedom of religion by assigning to the Prophet the job of "conveying the message of Allah" to humanity rather than imposing Islam on them; and that give each person personal responsibility "for his/her own acts and deeds" are:

Jakir Al Faruki and Md. Roknuzzaman Siddiky describe the Medina Covenant of Muhammad (also known as Constitution of Medina), as a "secular constitution".

Scholar Bernard Lewis points out that during its "first formative centuries", Christianity was separate from and often oppressed by the state, while "from the lifetime of its founder Islam was the state ... Islam was thus associated with the exercise of power from the very beginning".