Referring this issue back to the Book of Allah, we find it ordaining upon us to follow the Messenger of Allah in his commandments and warning us against whatever he prohibits. Furthermore it tells us that Allah has perfected the religion for the people. So, as long as Milad (birthday celebration) is not among the teachings of the Prophet it cannot be a part of the religion which Allah has perfected for us and asked us to adhere to by following the Prophet .
Again when we refer this issue back to the Sunnah, of the Messenger of Allah , we do not find either the Prophet or the Companions doing it by themselves or asking others to do it. So it becomes evident that Milad is not a part of religion, rather one of innovations and blind imitation of the people of the book, i. e. the Jews and the Christians in their festivals. With this argument in mind, it becomes crystal clear for everyone having the least insight and inclination towards truth and justice, that celebrating any birthday has nothing to do with Islam. It is rather among the innovations which Allah and His Messenger warned against emphatically.
A wise man must not be deceived by seeing a large number of people doing it throughout the world because the truth is known and recognized by the evidences of Sharee'a and not by the acts of a great number of people. Allah the Almighty says regarding the Jews and the Christians (what means): "And they say, 'None shall enter Paradise unless he be a Jew or a Christian.' These are their own desires. Say (Muhammad) 'Produce your proof if you are truthful.' " [Quran 2: 111]
And the Almighty also said (what means): "And if you obey most of those on earth, they will mislead you far away from Allah's Path. They follow nothing but conjectures, and they do nothing but lie." [Quran 6: 116]
Most of these innovations, in addition to their innovatory nature, also do not usually escape from a number of other evils, such as mixed gatherings of men and women, songs accompanied by musical instruments. drinking intoxicants, narcotics and the like. They may also involve the worst thing i. e. the greatest Shirk (polytheism), through showing exaggeration in the Messenger of Allah and other saints and through praying to him, invoking his help or believing that he knows what is hidden and all similar claims which render a believer as an infidel.
It is authentically reported that the Messenger of Allah has said: "Beware of extravagance in the Religion: It has caused the people before you to perish." He also said: "Do not lavish praise on me as the Christians did with the son of Maryam (Jesus, the son of Mary). I am just a bondman. So Simply say: The bondman of Allah and His Messenger." [Al-Bukhari]
It is curious to note that a great many people participate most actively in these celebrations and defend them vehemently, while they sit back from attending the obligatory forms of worship such as daily and Friday prayers. They are not even ashamed of this, nor do they realize that they are committing a great evil. Undoubtedly, this shows the weakness of their faith, their short-sightedness, and the deeply ingrained rust on their hearts because of sins and disobedience. We ask Allah's protection for us and for all the Muslims.
It is even more astonishing to note that some people believe that the Messenger of Allah is present at Milaad. Consequently they stand to greet and welcome him. That is not only a sheer lie but a worst form of ignorance, as the Prophet shall neither come out of his grave before the Day of Resurrection, nor shall he meet the people or attend their meetings. Instead, he shall remain in his grave till the Day of Resurrection while his soul rests at the highest of the high with his Lord in the most exalted and highest place.
Allah The Almighty says (what means): "After that, surely, you will die. Then (again), you will be resurrected on the Day of Ressurection." [Quran 23: 15 & A.16] And the Prophet said: "I am the first one to rise from the grave on the Day of Resurrection and I will be the first intercessor and the first one whose intercession is to be accepted".
The aforesaid evidences from the Qur'an and Hadith prove beyond doubt that the dead people will come out of their graves only on the Day of Resurrection. All the scholars of Islam agree upon this. A Muslim should be aware of these things and must not be easily misled by the innovations and the superstitions created by the ignorant people with no authority from Allah at all.
As for offering the blessings and greetings (Salat and Salam) to the Prophet they are among the most preferred and virtuous deeds in accordance with the saying of Allah (which mean): "Allah sends His Salat (Graces, Honours, Blessings, Mercy, etc.) on the Prophet (Muhammad) and also His angels too (ask Allah to bless and forgive him). O you who Believe! Send you Salat on (ask Allah to bless) him (Muhammad), and (you should) greet (salute) him with the Islamic way of greeting (salutation i.e. As-Salaamu-Alaikum)." [Quran 33: 56]
The Prophet has said: "Whosoever sends blessings on me one time, Allah sends blessings on him ten times." It is prescribed on all times, particularly at the end of each prayer. It is held obligatory at last Tashahud of each prayer by most of the scholars. It is strongly required at a number of occasions such as immediately after Adhaan (the call to Prayers), at the mention of the name of the Prophet , during the day of Friday and the night preceding it according to a host of Ahadith.
This is what I wanted to emphasize regarding this issue. I hope it will satisfy everyone whom Allah has shown the light. How sad it is to see some devoted Muslims, known for their strength of faith and love for the Prophet organizing such innovatory celebrations.
Let us ask such people: "Tell us, if you belong to Ahl-As-Sunna and follow the Prophet, whether he himself or one of his Companions or their successors did this or is it no more than a blind following of others?
The love of the Prophet is not reflected by the celebration on his birthday, but by obeying him, believing in his teachings, keeping away from what he prohibited and by worshipping Allah in the way he prescribed for us. It is also reflected through offering Salat and Salam to him from time to time, particularly at the mention of his name and during prayers.
May Allah help us and all the Muslims to understand His religion, to continually confirm us on it, stick to Sunnah and keep away from the innovation. Indeed He is Generous and Kind. And May Allah Shower His blessings and mercy upon our Prophet Muhammad his Posterity and his Companions.
[Summarized from an article by late Shaikh `Abdul `Aziz bin `Abdullah bin Baaz.