This study critically examines the dynamics of legitimacy in the development of the Indonesian halal industry through an Islamic political economy approach. This article presents a multidimensional analysis of the intersection between political power and Islamic values by integrating Neo-Institutional Sociology Theory (emphasizing the role of norms and institutional legitimacy) with the classical views of Ibn Khaldun (governance, justice, wealth, and sharia law). The findings indicate a shift in halal sector governance from fulfilling sharia-based economic justice to political interests and power consolidation that have created inequality between sub-sectors influenced by selective regulation, political intervention, and instrumentalization of Islamic norms. Three conceptual frameworks are offered: (1) Islamic Political Economy in the Halal Industry; (2) The Urgency of Re-Islamizing Halal Governance; and (3) State Politics in the Formation of Islamic Economic Institutions. All three are synthesized in the Islamic Political Economy Model as a critical analytical tool to evaluate the dynamics of power and institutional legitimacy in the halal economy.