The UP Institute of Islamic Studies was created on November 22, 1973 by Presidential Decree 342, as a part of the Philippine Center for Advanced Studies (PCAS). Following the Abolition of PCAS on July 9, 1979 by virtue of Executive Order No. 543 issued by the President of the Philippines, the Institute was re-established as a separate unit of the University.

It aims to provide university students, both Muslims and non-Muslims, an opportunity to participate more fully in national life and development. More specifically, it intends to create deeper understanding and more rapport between the Muslims of the Philippines and the rest of the University of the Philippines national community. Moreover, it aims to shed light on certain portions of Philippine history and to place in proper perspective the role of the Islamic cultural heritage in shaping the Philippines and neighboring Southeast Asian countries. It is envisioned that the Institute will serve as a meeting place for scholars interested in Islamic history and culture from Asia and other parts of the world.