Many scholars identify three foundations underlying the guidance contained in Islam. These are Aqidah, Akhlaq and Shari`ah. Aqidah governs the principles of faith and belief in Islam. Akhlaq defines the Islamic ethical code as it relates to personal conduct. Nowadays, the term Shari`ah (literally 'path to a fount') is treated as being synonymous with the term Ahkam (literally 'law'). Shari`ah governs all forms of practical action, itself comprised of `ibadat (the law pertaining to devotional matters) and mu`amalat (the law pertaining to activity in the political, economic and social spheres). Generally speaking, only the law of mu`amalat is considered enforceable in an Islamic court of law.

The Qur'an is regarded by Muslims as the ultimate unimpeachable reference when establishing Islamic law. The practice and traditions of the Prophet Muhammad s.a.w., known as Sunnah (literally 'way' or 'path'), and the sayings of the prophet, known as the Ahadith (singular Hadith), are next in order of importance when deriving Islamic principles. During the time of the Prophet, ahadith were passed on verbally by the many reliable narrators who had committed them to memory. Important narrators of ahadith included Ibn al-As, Abu Hurayra, Abdallah ibn Umar, Anas ibn Malik, Aisha Um Al-Mumminin, Ibn Abbas, Jabir ibn Abd Allah, Abu Said ibn Malik, and Ibn Masud

A definitive compilation of ahadith was probably not attempted until the reign of al-Mamun when, in response to growing unease at the hundreds of thousands of varying and contradictory ahadith that had become widespread, the major compilers and biographers of the prophet produced what have now become standard works. The six most authentic ahadith collections, the Sihah Sitta or al-Kutub al-Sitta, are those of Bukhari, Muslim, Tirmidhi, Abu Daud, Nasa'i and ibn Majah.

The prophet said that '... after I am gone differences will arise among you. Compare whatever is reported to be mine with the Book of God. That which agrees therewith you may accept as having come from me. That which disagrees you will reject as a fabrication'. Thus arose a strict scientific method, under which reported ahadith and sunnah were scrutinised for authenticity. For example, the honesty and virtue of the one reporting such ahadith, as well as the chain of reporting (the isnad), had to be well established in order for a hadith to be authenticated by the early writers. Bukhari used some 4,000 ahadith and Abu Daud some 4,800.

Categories of ahadith include Sahifa which are collections compiled by companions or those of the following generation, Risala which contain hadith on one topic, Musanaf which contain hadith on most or all topics, arranged into chapters by topic, Jami which are collection of Hadith on all major topics, Musnad which contain a hadith with an isnad traceable to a companion, or else of reliable authority, and Sunan which contain hadith relating to `ibadat and mu`amalat. Major compilers of hadith include Abu Abd Allah Muhammad ibn Ismail al-Bukhari whose Sahih al-Bukhari is regarded by many as the most important Musanaf work; Imam Muslim (died 261 AH) which is rated by some as superior to Sahih al-Bukhari due to the great strictness with which the writer authenticated its contents, Imam Malik (died 179 AH) who founded the Maliki school and whose law manual al-Muwatta is a comprehensive and respected work containing many ahadith available in both Bukhari and Muslim, Abu Abd al-Rahman al-Nasa'i (died 303 AH) who left a Sunan work, Abu Isa Muhammad ibn Isa al-Tirmidhi (died 279 AH) who was born in Makkah and left a Jami work, and Abu Abd Ibn Majah (died 273 AH) who left a Sunan widely regarded as one of the weaker of the major hadith collections.

Islamic scholars, ulama, may find an area of human activity for which no reference is made in the Qur'an, Ahadith or Sunnah. In such a case, theologians may indulge in ijtihad, the forming of independent judgements, so as to guide Muslims in the relevant activity. The resulting jurisprudence is termed fiqh (literally comprehension) and the passing of a judgement is termed a fatwa. Fiqh is derived in two ways. Firstly, through achieving a consensus among ulama, termed Ijma, and secondly through deduction by analogy with existing principles, termed Qiyas. Under no circumstance can the injunctions of the Qur'an be negated or annulled by reference to any other source. Shari`ah is thus composed of laws derived from the Qur'an, Sunnah, Ijma and Qiyas. There are four major Sunni schools, these being the Hanifi, Maliki, Shafi'i and Hanbali, and two major Shia schools, the Ithna Ashari's and the Ismaili's. Whilst the sects differ in some fundamental aspects of Islamic belief, the schools themselves do not seek to found a new form of belief but rather to arrive at new methods of studying existing beliefs.

The Hanafi School is named after the great Muslim jurist Imam abu Hanifa (Nu'maan bin Thabit, died 150 AH). Abu Hanifa originated from Kufa, now in Southern Iraq, and had two great followers, Abu Yusuf and Mohammed, both of whom where remarkable jurists in their own right. The Hanafi school of thought is based on the verdicts, legal thought and analysis of all three of these scholars and is believed to be the most liberal of in its interpretation of the Qur'an and Sunnah. So much so that the traditionists (those who gathered and compiled Hadith) called them 'The People of Opinion' as opposed to the 'People of Tradition'. This school is therefore said to be the most flexible and easiest to accept. Their use of Qiyas is unparalleled but they nevertheless regarded the Hadith as important. Abu Hanifa would not give preference to his analogy over the opinion of any Companion. One of Abu Hanifa's verdicts regarding interest is that a Muslim in Darul Harb (a non-Muslim country) may engage in the un-Islamic transactions of the indigenous people if, i) he has a valid need and reason to do so, ii) he has no intention of any deception and fraud, iii) he has no other course of action open to him. The Hanafi school of thought does cater for diverse cultures, norms and circumstances. This is precisely why it has been adopted primarily by non-Arabs (the Iranians, Afghanis, Turks, Muslims in Russia and the sub-continent, and also in Syria).

The Hanbali School is named after the great traditionist Imam Ahmed ibn Hanbal (died 241 AH). Imam Hanbal was a student of Imam Shafi'i and a teacher of Imam Bukhari, the traditionist. He was a scholar of great repute. The Hanbali school of thought is said to be the most literal of all the schools, taking many texts by their words only. Although there is a methodology that the Hanbali scholars claim and maintain, the emphasis is on not making any academic somersaults in order to interpret the text. The approach is often regarded as being most suitable to those who have little inclination towards philosophy and other humanities. Ibn Taymiyah and his students Ibn Qayyim and Ibn Khatir were the main advocates of the Hanbali school of thought. A substantial number of people in Saudi Arabia follow this school of thought in the present day.

The Maliki School is named after the great traditionist and jurist of Madinah, Malik ibn Anas (died 159 AH) was renowned for his narration of Hadith and is credited with being one of the very best and earliest. Imam Malik's approach to jurisprudence is to follow the practice of the people of Madinah, whom he thought were the closest to the original Sunnah of the Prophet. He argued that if the community of Madinah agreed or sanctioned a certain act, then their view should be given priority over any other since Madinah was the hub of Islamic knowledge and practice. In fact, Malik has given preference to the practice of the people of Madinah over some Hadith that did not conform with the known practice. Most of his verdicts originate from the collection of Hadith which he himself compiled in his book Muwatta. Most of Imam Malik's students travelled to North Africa and Spain and hence almost all of North Africa (excluding Egypt), Spain and Sudan follow the Maliki school of thought.

The Shafi' school is named after the traditionist and jurist Mohammed ibn Idris as-Shafi'i (died 204 AH). Imam Shafi'i is credited with being the first Muslim jurist to form a legal doctrine and systematic analysis. His work entitled Al-Risalah is unique in this regard. However, the Hanafi doctrine was established much earlier than that of Shafi'i even though the former was not codified in any book. Shafi'i is one of the first traditionists who sifted the chain of narrators and called for Muslim scholars to look at their chain of narrators with a critical eye. His jurisprudence falls into two phases of his life, the first before he moved to Egypt and second subsequent to this. After his move to Egypt, Shafi'i retracted a number of his earlier verdicts. His verdicts are usually based on giving priority to any sound Hadith over analogy. He does not accept the authority of the Companions, arguing that they had a right to their opinions as much as others have a right to their own. He was a student of Imam Malik and a contemporary of the two students of Abu Hanifa. His verdicts have been gathered in a book written by his famous student Muzni, entitled Al-Umm. Most of the rest of the Muslim world (Egypt, Malaysia, Indonesia Iraq and some of the African countries) follow his school of thought.