Concentration risk exposes Islamic banks to the possibility of financial distress and to a certain extent, increases the probability of default. This paper analyses the concentration levels of Malaysian Islamic banks to commodity murabahah. This study is aimed at exploring the possibility of concentration risk as a result of extensive usage of commodity murabahah as the underlying Syariah contract. The Malaysian Islamic banking sector is extremely vulnerable to systemic risks with concentration of banking sector assets at both micro and macro levels as one of the material sources. The high level of commodity murabahah concentration in the Malaysian Islamic banking financing and deposits requires analysis and improvement of the existing supervisory practice. Islamic banks are suggested to limits their exposure to a certain type of underlying contract as part of their major risk control. Another key suggestion worth considering is for Islamic banks to have a greater and adequate disclosure of information on concentrations of financing assets. It is also recommended for Islamic banks and scholars to initiate the exploration of other products in replacement of commodity murabahah.