After the death of Ali, opponents of the new Umayyad dynasty promote the claims of Ali's two sons, Hasan and Husayn (grandsons of Muhammad). Their party becomes known as Shi'at Ali (the 'party of Ali'). The political cause crumbles after the death of the brothers (Hasan dies in about 669 and Husayn, subsequently the most holy of Shi'ite martyrs, is killed in the battle of Karbala in 680). But their faction has from now on a lasting religious disagreement with the Islam of the Caliphs in the clash between Sunni and Shi'a.

The main group under the caliphate becomes known as Sunni (those following Sunna, the orthodox rule) and the members of the new schismatic sect are known as Shi'as or Shi'ites, from the original name of their party.

The Shi'as argue that only the descendants of Ali can lead Islam. They themselves subdivide into several sects on the issue of which of his descendants have been the true imams, but the majority acknowledge a line down to a twelfth imam, Muhammad al-Muntazar, who is believed to have gone into hiding in 878. He is expected to return before the Last Judgement as the Mahdi ('one who is guided').

Among the minor Sh'ia sects, the most significant are the Ismailis. They are known as the 'Seveners' because they follow the seventh imam, Ismail. By contrast the larger group of Sh'ias become the 'Twelvers', awaiting the return of the twelfth and last in the line of imams.

Of these two Shi'a sects, the Ismailis are the first to win political power. They establish the Fatimid dynasty, which rules Egypt and north Africa from the 10th to 12th century.

Elsewhere the Shi'as remain for the most part a minority sect until the 16th century, when the founder of the Ismailis makes Shi'ism the state religion of Persia. From this derives the subsequent strength of the Shi'a faith in Iran and parts of Afghanistan, Iraq and Turkey.