Since its inception Islam has been perceived by Muslims to be a universal code. During Muhammad's lifetime, two attempts were made to expand northward into the Byzantine domain and its capital in Constantinople, and within ten years after Muhammad's death, Muslims had defeated the Sassanids of Persia and the Byzantines, and had conquered most of Persia, Iraq, Syria, and Egypt. The conquests continued, and the Sassanian Empire was soon after destroyed and the influence of Byzantium was largely diminished (see Byzantine Empire). For the next several centuries intellectuals and cultural figures flourished in the vast, multinational Islamic world, and Islam became the most influential civilization in the world.

The first four successors of Muhammad, known as rightly guided caliphs, ruled for some 30 years . Their rule, together with that of Muhammad, is considered by most Muslims to constitute the ideal Islamic age. The second caliph, Umar, ruled from AD 634 to 644; he is credited with being the first caliph to found new Islamic cities, Al Basra (AD 635) and Kufah (AD 638). The administration of the eastern and western Islamic provinces was coordinated from these two sites. After the third caliph, Uthman, was murdered by a group of Muslim mutineers, the fourth caliph, Ali, succeeded to power and moved his capital to Kufah in Iraq. From this capital he fought the different opposition factions. Among the leaders of these factions, Mu'awiyah, governor of the rich province of Syria and a relative of Uthman, outlasted Ali. After Ali's death in 661, Mu'awiyah founded the Umayyad dynasty, which ruled a united Islamic empire for almost a century. Under the Umayyads the Islamic capital was shifted to Damascus.

The followers of Ali were known as the Shia (partisans) of Ali. Although they began as a political group, the Shia, or Shia Muslims, became a sect with specific theological and doctrinal positions. A key event in the history of the Shia and for all Muslims was the tragic death at Karbala of Husayn, the son of Ali, and Muhammad's daughter Fatima. Husayn had refused to recognize the legitimacy of the rule of the Umayyad Yazid, the son of Mu'awiyah, and was on his way to rally support for his cause in Kufah. His plans were exposed before he arrived at Kufah, however, and a large Umayyad army met him and 70 members of his family at the outskirts of the city. The Umayyads offered Husayn the choice between a humiliating submission to their rule or a battle and definite death. Husayn chose to fight, and he and all the members of his family with him were massacred. The incident was of little significance from a military point of view, but it was a defining moment in the history of Shia Islam. Although not all Muslims are Shia Muslims, all Muslims view Husayn as a martyr for living up to his principles even to death.

The Twelver Shia, or Ithna-'Ashariyya, is the largest of the Shia Muslim sects. They believe that legitimate Islamic leadership is vested in a line of descent starting with Muhammad's cousin and son-in-law, Ali, through Ali's two sons, Hasan and Husayn, and then through Husayn's descendants. These were the first 12 imams, or leaders of the Shia Muslim community. The Shia Muslims believe that Muhammad designated all 12 successors by name and that they inherited a special knowledge of the true meaning of the scripture that was passed from father to son, beginning with the Prophet himself. This family, along with its loyal followers and representatives, has political authority over the Shia Muslims.

Sunni Islam was defined during the early Abbasid period (beginning in AD 750), and it included the followers of four legal schools (the Malikis, Hanafis, Shafi'is, and Hanbalis). In contrast to the Shias, the Sunnis believed that leadership was in the hands of the Muslim community at large. The consensus of historical communities, not the decisions of political authorities, led to the establishment of the four legal schools. In theory a Muslim could choose whichever school of Islamic thought he or she wished to follow and could change this choice at will. The respect and popularity that the religious scholars enjoyed made them the effective brokers of social power and pitched them against the political authorities.

After the first four caliphs, the religious and political authorities in Islam were never again united under one institution. Their usual coexistence was underscored by a mutual recognition of their separate spheres of influence and their respective duties and responsibilities. Often, however, the two powers collided, and invariably any social opposition to the elite political order had religious undertones.

An ascetic tradition called Sufism, which emphasized personal piety and mysticism and contributed to Islamic cultural diversity, further enriched the Muslim heritage. In contrast to the legal-minded approach to Islam, Sufis emphasized spirituality as a way of knowing God. During the 9th century Sufism developed into a mystical doctrine, with direct communion or even ecstatic union with God as its ideal. One of the vehicles for this experience is the ecstatic dance of the Sufi whirling dervishes. Eventually Sufism later developed into a complex popular movement and was institutionalized in the form of collective, hierarchical Sufi orders.

The Sufi emphasis on intuitive knowledge and the love of God increased the appeal of Islam to the masses and largely made possible its extension beyond the Middle East into Africa and East Asia. Sufi brotherhoods multiplied rapidly from the Atlantic coast to Indonesia; some spanned the entire Islamic world, others were regional or local. The tremendous success of these fraternities was due primarily to the abilities and humanitarianism of their founders and leaders, who not only ministered to the spiritual needs of their followers but also helped the poor of all faiths and frequently served as intermediaries between the people and the government.