The Sumatran beachheads of Islam had commercial ties with other parts of the region, but they were not closely involved in events outside their immediate neighbourhoods. In Java, on the other hand, where the distance between the Muslim coastal fringe and the interior was negligible, a tense situation developed. The Muslims did not overthrow the kingdom of Majapahit (see above). Majapahit, weakened by feuds within its royal family and increasingly denied the benefits of overseas commerce, merely withered away and disappeared in the early 16th century. The passing of its hegemony left a power vacuum in Java that set in train a conflict between Islam and the aristocratic traditions of the interior.

In later centuries, the Javanese inland elite chose to bridge over the events of the 15th and 16th centuries and see a continuity between Majapahit and Mataram, the great kingdom of 17th-century Java. This vision of the past, however, conceals a very troubled period in Javanese history. The militant mood of coastal Islam may be seen in the enforced imposition of the new faith on western Java and also on Palembang in southern Sumatra. Similarly, the impact of Islam may be gauged by the fury of the 17th-century Mataram kings against the princes and Muslim notables of the northern coast.

The conflict seems to have begun with the determination of the Demak coastal rulers in the first half of the 16th century to rule over a great Javanese kingdom. The coastal princes, especially as their harbours grew richer and their dynasties older and more confident, came to see themselves not only as Muslim leaders but as Javanese princes. Their pretensions are reflected in Tomé Pires' statement that they cultivated the "knightly" habits of the ancient aristocracy. But when Demak sought to expand inland, bringing with it Islam, its armies were halted in the mid-16th century by Pajang. Some years later, Mataram, another principality in central Java, came to the fore. The climax of the conflict was in the first half of the 17th century, when Agung, ruler of Mataram, took the offensive and destroyed the coastal states and with them the basis of Javanese overseas trade.

 
Mosque of Jepara with typical Hindu-Javanese meru-roof.

It is unlikely that this bitter struggle was fought only for religious reasons. Islam came to Indonesia from India, perhaps from southern India, and the mood of heterodox mystic Sufi sects of Islam was probably not foreign to the Javanese ascetics. Sufi "saint" (wali) and Javanese guru eventually would have understood and respected each other's yearning for personal union with God. The Javanese tradition, in which small groups of disciples were initiated by a teacher into higher wisdom, was paralleled by the Sufi teaching methods. For Muslim theologian and Javanese scholar alike the concern was always less with the nature of God than with skills for communicating with him. Arabic texts tended eventually to be recited as meditative aids, just as the Tantric mantras once had been.

The earliest Javanese disciples of Islam were, however, not the thoughtful representatives of earlier religious systems in Java but humble men of the coast who had been left outside the traditional teachings of the courts and the anchorites. These men doubtless saw in Islam a simple message of hope, offering them not only a congenial personal faith but also opportunities of secular advancement in a trading society where rank was not as important as fervour. Early Muslim literature has a theme of the wandering adventurer who comes from obscure origins, makes good, and seeks the consolations of Islam. For Muslim disciples such as these the times offered boundless means for achieving success, either in trade or in the service of ambitious princes. These princes, parvenu aristocrats and also the product of Islam, needed guardians of their conscience, courtly advisers, and, above all, military commanders. For the new elite the progress of coastal Islam brought both spiritual and material gain.

All of this must have been greatly disturbing to those in the interior who had been nurtured in older traditions and saw no reason for abandoning their Shaivite-Mahayana values. For the aristocrats of the interior, the memories of Majapahit's hierarchical system of government under a godlike king represented standards of civilized behaviour that must be asserted at all cost against the forces of confusion released by the coastal population. Contacts between wandering dervishes and the peasants, at a time of acute distress caused by warfare, and the pretensions of Muslim court officials, some of whom claimed a privileged religious status without precedent in Javanese history, must have seemed to threaten the foundations of society. The ruler of the interior kingdom of Pajang is depicted in the Javanese chronicles as an ascetic and as the son and grandson of ascetics. He was, in this respect, a true Javanese king. When, several generations later, the ruler of Mataram destroyed the coastal states he was seeking to destroy the forces that disunited Java. This was in the tradition of earlier Javanese kings. His conquests were as much a part of his mission as Kertanagara's had been in the 13th century.

Thereafter Islam was permitted to survive only on Javanese royal terms. Its innovating effects were postponed until the end of the 19th century. It was now one of several religious activities and therefore tolerable in Javanese eyes. Muslim officials in the court of Mataram became well-rewarded and obedient servants of the ruler. In time, scholars returned to the study of the earlier genre of Javanese literature, including texts that taught the nature of government according to the values of the "Hindu-Javanese" world. In the countryside, Islam remained influential in time of social distress, preaching to aggrieved peasants of the coming of the Messiah. As a literary influence Islam survived in the form of mystical texts and poems, romantic tales, and also in borrowings by later inland-court historians of material from the "Universal Histories" (Serat Kanda) of the coastal culture. The borrowings are testimony of the impact of what had happened in the 15th and 16th centuries, which later historians could reinterpret but not ignore.

The history of 16th-century Java is still not fully understood, but Portuguese intervention seems to have been unimportant. The Portuguese survived chiefly as private traders, and, by the end of the century, the level of Muslim Indonesian trade with the Middle East, and thence with Europe, was greater than it had ever been. In the neighbourhood of the Strait of Malacca, Aceh and Johore were struggling for overlordship, and the scene in Java was being prepared for the final phase in the struggle between coastal Islam and the inland aristocracy. The outcome might have been the emergence of greater Indonesian unities under cover of Javanese claims to leadership. The situation was altered by the appearance of the Dutch at the end of the century.