The compatibility between Islam and democracy has become one of the main controversial issues of contemporary Islamic political thought. Rachid Ghannouchi has been recognised for his adherence to the concept of Islamic democracy. The purpose of this article is to examine the views of Rachid Ghannouchi towards Islam and democracy through a range of his writings and statements. As such, the research methodology applied is qualitative with data collection instruments. The article uses textual analysis to study how democracy is understood by Ghannouchi within an Islamic framework, along with his theory on the compatibility of Islam with democracy. The article has shown that he adopts a perspective of harmony between modern political thoughts and the original form of Islam as he proposes principles and characteristics of Islamic democracy. Islamic concepts such as shūrā, ijtihād, maṣāliḥ and values such as justice, freedom, and pluralism are discussed. Ghannouchi’s line of thought and its highlights are not free from critics from both the Islamic quarters as well as non-Islamists. Criticisms towards Ghannouchi as well as his responses are duly discussed.