This paper draws constructively on Islamic Neoplatonic thought from the classical and contemporary Ismaili tradition to present a Muslim theodicy in metaphysical and soteriological terms. According to classical Ismaili philosophers, God directly creates a perfectly good first creation known as the First Intellect – which corresponds to the “best possible world” in modal terms and directly solves the classical problem of evil. The metaphysical root of “evil” is an ontological imperfection that exists within the Universal Soul – which is the proximate effect of the First Intellect and merely the indirect effect of God. This imperfection prompts the Universal Soul to seek perfect goodness by way of goal-oriented action; therefore, the Universal Soul strives to achieve self-perfection by creating the Cosmos. Through the Universal Soul’s creative activity, its potential perfection manifests in the world as goodness, compassion, and justice, while its latent imperfection manifests as corruption, deficiency, and moral evil. The Universal Soul emanates individual souls that strive to become perfect and cleanse themselves of evil. The human soul’s experience of external and internal evil facilitates its recognition of and desire for goodness and perfection – which corresponds to a soul-building theodicy. Accordingly, the medieval Ismaili philosophers and the Ismaili Imam Aga Khan III (d. 1957) explain that the natural calamities endured by human beings due to factors beyond their control present an opportunity for the human soul to purify and perfect itself spiritually. In this way, while evil must be ultimately transformed into perfection, the experience of evils provides occasions for the soul’s spiritual progress.