Purpose – The purpose of this paper is to explore the nature and contents of Islamic management practices and their consequent implications for human resource management (HRM) in Arab countries. In addition, it aims to examine the implications for multinational companies (MNCs) operating in Islamic countries and the impact of globalisation before proceeding to an analysis of managerial problems in Arab countries and the need for understanding Islamic management principles by Arab (national) and international managers. Design/methodology/approach – The paper takes the form of a qualitative approach based on an extensive review of relevant literature and the employment of examples from selected Arab countries. Findings – The study reveals that a gap exists between the theory of Islamic management and the practice of management in Arab countries. Management in Arab countries is informed and heavily influenced by non-Islamic traditional and national cultural values and norms of different countries and by Western management thinking rather than Islamic principles derived from the Holy Quran (words of God) and the Hadith (words of the Prophet Mohamed). Research limitations/implications – The paper argues that one of the main reasons for the lack of progress in most Arab and Islamic countries is the mismatch between global integration and local responsiveness because of an excess forward diffusion of Western management and business practices with little understanding and, hence, the implementation of Islamic management principles by both local and international managers in Arab countries. It adopts the view that there is a gap between the knowledge possessed by national and international managers in order to manage locally and what is required from the local workforce to be managed effectively. The main limitation of this study is the lack of empirical research evidence to support the points deducted from this review of literature. Practical implications – Understanding Islamic management principles could help to develop a more appropriate type of management best practice in Arab and Islamic countries while still benefiting from the transfer of relevant Western management techniques and Western technology. The paper also argues that a reverse diffusion of management knowledge and skills by managers of MNCs is very important for the effective management of human resources in host countries. National cultural contexts and different views of work values have made a major impact on the ability of firms to address HRM issues in different cultural settings. Originality/value – The paper contributes to the comparatively sparse literature on Islamic management and its applications by identifying key issues for HRM implementation and in developing Western understanding of Islamic management systems.