During the past two decades, Muslim Community Organizations (MCOs) in the West have increasingly become stakeholders in the public debates and the national consultations regarding the Muslim communities. MCO’s perception of Islamophobia is critical for understanding their collective response to the problem. Much of the Australian literature, nonetheless, tends to subsume Islamophobia within the dynamics of exclusion/inclusion within a social cohesion paradigm, and primarily through a focus on individuals. This article aims to contribute to the existing literature through a deeper contextual understanding of Australian MCOs’ framing of and engagement with Islamophobia in its various manifestations, in order to better cognize its impact on their agentic capacity. Deploying an expanded theoretical framework of agency structure, this article analyzes 25 interviews with representatives of Victorian MCOs, to explore their perceptions of Islamophobia across multiple domains of power—the social, discursive and the political. MCOs’ perceptions of the problem impact their responding anti-Islamophobia civic–political engagements towards soft grassroots connections and Muslims’ empowerment. In light of the findings, the article points for the need to enhance building inter-community solidarity, utilize supportive institutional multicultural schemes and establish a separate Muslim advocacy organization.