Issues about Islamic education have gained much attention to various historical, political, and socio-cultural factors. The state of Islamic education is attached to a great extent to local and international developments. Islamic education, like other institutions in the Muslim world, has struggled with challenges of development, modernization and globalization. Islamic education faces challenges from within as well as the challenges that the system poses to communities and societies in the Muslim world and beyond. The challenges explained by categories of its position within the larger educational system, its education process and pedagogy, the efforts of Muslim scholars, and modernization, politicization and militarization of Islamic education. However, improvement of the existing achievements must be a continuous exercise. A certain kind of strategy has to be designed and regularly improved. Through this, Islamic education could be a leadingendeavor for the sake of harmonious and safe living for all mankind, irrespective of ethnic and religious orientations, and also could achieve the educational balance between tradition and enlightenment.