This research tests qualitatively the relationship between leadership, organizational culture and organizational effectiveness in Islamic organizations in Australia in the early years of the 21st century. We also researched the contextual challenges faced by Islamic organizations in Western societies during the early years of the 21st century. Qualitative and quantitative data were analyzed qualitatively. Theoretical sampling and theoretical coding generated a positive and negative story-line. A grand narrative of Muslim disenfranchisement and several microstories of organizational complexity brought to life the story-lines. One conclusion is that context invariably is problematic for leadership. Another conclusion is that leadership cannot be studied fruitfully out of context. A third conclusion from this substantive setting is that a challenge for Islamic leadership is to reconstitute the context of the organization. An underlying parallel with structure-agency theory is noted. The leadership of Islamic organizations is faced with the traditional leadership challenges found in the extant literature. In addition it must accommodate a problematic external context, a heterogeneous followership, the important role of religion, the influence of Imams, and increasing roles for women and young Muslims.