In this research, an attempt has been conducted to explore the relation between Islamic banking development and economic growth of Indonesia over the periods of 2003–2014. Two models have been formulated which are financing and deposit models to indicate the relation. The analysis are using unit root test, co-integration test, and Granger causality test within the context of VECM framework. For this purpose, financing and deposit are used as a measure of Islamic Banking development, while gross domestic product (GDP) and gross fixed capital formation (GFCF) used the indicators of economic growth. The results show that there is bi-directional causality between financing and GDP also deposit and GDP reflecting the bi-directional causality between Islamic banking development and economic growth. Further results show that there is significant short-run and long-run causality running from Islamic banking development to economic growth so as short-run and long-run causality running from economic growth to Islamic banking development. 
Keyword: Islamic banking development, economic growth, Indonesia, Vector Error Correction Model