The IOU was originally a product of Dr Bilal's teaching courses in Islamic Studies at the American University in Dubai for seven years after Islamizing the complete curriculums of study for the college of education of the Sharif Kabunsuan College in Cotabato City, Mindanao, Philippines in the early nineties. One year after the IOU's establishment in 2001 the program ran into technical difficulties and had to shut down, however, the material developed for its courses was used to establish a department of Arabic and Islamic Studies at Preston University - Ajman, UAE and three years later the department had its first batch of BA graduates.

After running the Islamic Studies department at Preston for one year as its dean, Dr Bilal moved to Doha, Qatar, and in the beginning of 2007 established another BA in Islamic Studies (BAIS) program in Doha, approved by Omdurman Islamic University in Sudan for accreditation, under the title of the Islaamic Studies Academy.

The BA & MA programs of the IOU represent the online version of the Islamic Studies Academy's accredited BAIS & MAIS programs, which are the only accredited BAIS & MAIS programs of studies available on the internet.

In April 2007 the Islamic Online University (IOU) reopened its doors with the popular Da'wah Training Course after a five-year interlude. To enhance the student's learning experience, the server and the LMS (Learning Management System) of the IOU have been upgraded. As a result, the courses now have audios and Flash format videos enabling easy viewing online for all types of internet connections. There are also monthly online live student forums with Dr Bilal, as well as general forums for students to discuss and research together.

In 2013, IOU started to broadcast to the virtual world via Insights TV; television station dedicated to broadcasting free Islamic knowledge across the world. And also in the same year, IOU magazine Insights was successfully launched.

In 2014, IOU has been granted operational license in The Gambia and introduced new departments: Department of Education, Department of Islamic Economics, Banking & Finance, and Department of Psychology. All departments offer BA degree, Diplomas or Certificates to choose from. And also new Department of Arabic Language and Linguistics which offers two year Intensive Arabic program was opened.

Thus IOU now has a single virtual campus for all its accredited programs hosted on its own dedicated server.