The current study aims to develop a Maqasid al-Shari’ah (objective of Islamic Law) based a new performance evaluation index for Islamic banks. In order to achieve the objective, the current study conducted twelve semi-structured interviews of academics and practitioners who specialize in Islamic banking and finance (IBF) to select the variables for the index. In order to validate the selected variables, a focus group discussion was arranged that consisted of five experts in IBF. Then, in order to prioritize the selected Maqasid variables, items and sub-items, the Analytic Hierarchy Process (AHP) was employed. The thirty respondents included industry experts, Shari’ah scholars and academics. Lastly, an index was developed and tested on some selected Islamic banks in Malaysia and Bangladesh to rank their Maqasid based performance. The findings revealed that RHB Islamic bank ranked first among the sampled Islamic banks. Overall, Malaysian Islamic banks performed better than Bangladeshi Islamic banks. The novelty of this study lies in its contribution to the theory of Maqasid al-Shari’ah with respect to banking performance evaluation. The index is expected to assist policy makers, practitioners and other stakeholders to determine whether the performance of Islamic banks is in line with Maqasid al-Shari’ah and therefore adopt necessary policy changes accordingly.