This paper is concerned with the understanding of Islamic revivalism, Islamization and its political implications in Malaysia. Since the mid-1970s Malaysia has experienced progressive Islamization, a process which has picked up significant momentum under the Mahathir administration. The Islamic revivalism movement was symbolized by the emergence of a host of dakwah groups. Most of the dakwah groups were aimed at propagating Islamic fundamentalism to Malay muslims. Many of these groups were avowedly apolitical; nevertheless some of the dakwah themes which emerged had political implications. The government as well as the ruling party, UMNO, were concerned that these dakwah groups if they became too popular, would not only set back governmental development efforts designed to uplift the economic position of the Malays, but also may threaten their political supremacy. All of this made UMNO and the Barisan Nasional government understandably nervous. They responded initially to the threat by making symbolic concessions to Islam. After Mahathir took office as Prime Minister in 1981, however, the government response gradually changed. UMNO leaders apparently decided that the only way to meet the Islamic challenge was with more Islam. It was in this context that Islamization has been accelerated in Malaysia with an increasing political significance. Now it becomes one of the most important decisive factors on the direction and scope of political changes in Malaysia. Despite its increasing speed of Islamization, however, when we consider Malaysia`s multi--ethnic, multi-cultural, multi-linguistic and multi-religious characteristics, prospect for the establishment of Islamic state seems to be rather uncertain.