This dissertation examines the British approach to institutional Islam in mandatory Palestine from 1917 to 1929. By looking at the establishment of Islamic institutions such as the Supreme Muslim Council (SMC), I clarify the process by which the Christian power transferred oversight over Islamic affairs to the local Muslim community. The period studied covers the beginning of British rule in Palestine, the elevation of the mufti of Jerusalem to the position of Grand Mufti, the riots at the Nabi Musa festival of 1920, the establishment of the SMC under the presidency of the mufti Hajj Amin al-Husayni, and the subsequent struggle between the Council and Zionists over the Western Wall from 1928-29. My work challenges the idea that the British decision to create autonomous Muslim-run institutions was an abdication of Britain's duty as a colonial power or was an act of appeasement towards the Arab population. Through a study of British archival material, memoirs from colonial officials and leading Arab observers, British and Zionist intelligence reports, newspaper reports, and select records from the SMC, I identify how British policy towards religion was driven by a vision of Palestinian society as divided along communal lines and how the creation of a separate Muslim-run institution was an attempt to recreate the supposed communal structure of the Ottoman millet system. I also reinvestigate the controversy over the SMC's participation in nationalist politics, arguing that its emergence as a political actor was produced in large part by the same communalist approach that led to its creation.