Polity is a global phenomenon that refers to the political system, structures, and processes for shaping and governing society. Islam, as a complete code of life, addresses all issues of polity. This study attempted to explore the political system of the Holy Qur’an, Practiced by the Prophet (SAAS) and the Khulafa-e-Rashidun as well. This study found that essential principles of the Islamic polity mentioned in the Qur’an are Tawhid (Islamic Monotheism), Shari`ah (Way of life), ‘Adalah (Justice), Hurriyah (Freedom), Musawah (Equality), Shura (Consultation), Al-Wasatiyyah (Moderation), Khilafah (Vicegerency), Ummah (Commonwealth), Muhasabah (Accountability), and Muʿāmalāt (Civil Conduct) etc. Regarding the Prophetic tradition, it is evident that the Madinan Charter, also known as the first written Constitution of the world and the Hudaibiyah Peace Pact were historically significant examples of a multicultural society where peaceful co-existence, freedom of all religions, and women’s participation had been ensured. Moreover, this study also discovered that the major Polity practiced by the Khulafa-e-Rashidun were Free and fair elections, Decision Process by Shura, Respecting Public Opinion, and Ensuring Transparency and Accountability etc.