In spite of the fact that the overwhelming majority of its population is Muslim, the development of the Islamic judiciary in Indonesia has been fraught with controversy. The ambiguous relationship between Islam and state has been at the core of a series of conflicts. On the one hand the effectiveness of Islamic law requires state intervention and Islamic jurisprudence demands that the Islamic judges should be appointed by the government. On the other hand state intervention is typically inspired by the interests of various groups as well as the interest of the state itself. Conflicts relating to the Islamic judiciary owe much of their intensity to the way the colonial administration affected the development of this body. This text will briefly narrate the development of the Islamic courts in Indonesia. Special reference will be made to the interaction between Islam and the state and to conflicts which were basically a result of colonial government policy. The development of the Islamic judiciary since independence, as is the case for other legal institutions, has been deeply influenced by the legacy of the colonial situation. The aims of legal development are not only to emancipate the administration of justice from the colonial past, but also to accommodate it to the demands of a modern society.