Abstract- Over the past three decades, the Islamic finance industry has emerged as one component of a competitive and comprehensive market, constistent with the conventional financial system in contributing to economic development. Although in early development the Islamic financial system is concentrated just in the country. But its growth internationally has seen a positive trend with the creation of growth in the number of Islamic financial institutions, with shareholders from various countries. This paper provides insights into the practice and prospect of islamich finance in Malaysia. The application and mechanics of Islamic finance are examined in the light of Islamic finance guidelines issued by central bank of Malaysia. As will be evident in this paper, this system has its own advantages and value added which would make it the system of choice in meeting specific investment interests and needs. Keyword: Islamic finance, growth, prospect, Malaysia.