This paper studies the relationship between Islamic banking growth and inflation in the Gulf Cooperation Council (GCC), Iran and Sudan using monthly time series and unbalanced monthly panel data covering the period 2001-2015. Several econometrics models are applied, including single equation model, panel ordinary least squares (OLS) and vector error correction model (VECM). The empirical findings revealed that Islamic banking does not increase domestic prices in all the models applied. According to the single equation OLS results, Islamic banking growth dampens domestic prices in Oman, Qatar and Iran. From VECM analysis, in the short-run, Islamic banking decreases inflation in Iran and Sudan and in the long run, Islamic banking growth dampens inflation in Bahrain and Iran. The panel regression results revealed no indication that Islamic banking growth increases inflation. Five out of seven countries considered in the study revealed that Islamic banking dampens domestic price inflation. Inflation inertia, monetary growth and exchange rate depreciation are the main factors that increase inflation in these economies. The impact of an increase in international food and oil prices on domestic prices reveals mixed results. While an increase in international food and oil prices increases domestic prices in certain countries, it dampens inflationary pressure in some other countries, which could be due to government subsidies. The empirical results underscore the need for economic diversification and reducing heavy dependence on oil. The results also highlight the need for the authorities to implement tighter monetary policies. The results offer new views and insight for further empirical work on Islamic banking and macroeconomic stability.