Derived from the drachma of the Persian Sassanid Empire, the dirhem became the silver currency of the Arab coinage system. It was already introduced as a unit of account in 632, shortly after Muhammad's death. The first real silver dirhems were minted by the 5th Ummayyad Caliph Abd al Malik. In his coinage reform (695/696) he insisted on the Islamic ban on depicting God and his creatures even on coins. This coin is one of the first to be minted after the reform. The obverse bears the inscription which recurs on all Islamic coins: "There is no God but Allah. He has no associate." The reverse also bears a religious inscription. Legends on the edge indicate the place and time of minting.

Abd al Malik's dirhem spread throughout the whole Caliphate from Bactria to Spain and was produced in many mints. It underwent its greatest dissemination from 800 to 1012. The relationship of its value to the dinar (the Arab gold coin) is given as 10:1. For smaller payments the dirhem was cut up. The term dirhem lives on to this day in the Arab region in the currencies of Morocco and the United Arab Emirates.