Ḥiyal (legal stratagems) play a significant role in Islamic finance as they may provide remedies and alleviate financial predicaments in many products. Nevertheless, excessive use of ḥiyal may amount to circumvention of Sharīʿah rulings and contravention of the objectives of the Sharīʿah. Hence, the application of this mechanism needs to work within stipulated parameters. The main objectives of this paper are to identify the distinctive features of ḥiyal by which ḥiyal-based transactions can be recognized and to determine the parameters of their application in Islamic finance. Ḥiyal have frequently been adopted as a means of legal manipulation to actualize an illegitimate objective. That has led scholars to classify ḥiyal into two types: permissible and impermissible.