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The name of the prophet of Islam has been represented in various ways in English. It is an Arabic name, and it is notoriously difficult to transliterate Arabic - or any Semitic language - into any European language.

In its own language, the name of the prophet has a dammah, or '-u-' as the vowel of the first syllable, and fatha, or '-a-' for the other two vowels. There is a shaddah, or doubling mark, over the second '-m-'. So it is best to represent the name by the English Muhammad. (The name 'Muhammad' - in Arabic ﻣﺤﻤﺪ - is the passive participle of the verb ﺣﻤﺪ (hammada), which means 'to praise', and so 'Muhammad' means 'praised' or 'praiseworthy'. A number of other Arabic personal names (e.g., Mahmud, Ahmad) come from the same root and have similar meanings.)

In previous times, the name 'Muhammad' has been written 'Mahumed', 'Mahomed', 'Mahommed', 'Mohammed', 'Mohamed', 'Muhammed', 'Muhammad' and 'Mahomet'. "Historically, the most widely used spelling in English contexts has been Mohammed; this spelling continues to predominate in the derivatives MOHAMMEDAN n. and adj., etc. [forms reflected in a name commonly, but not courteously, given to Muslims - see [(also Muhammadan, Mahommedan etc.)]]. The spelling Muhammad is now commonly used, especially in scholarly writings, as being closest to the form of the name in Arabic" (OED, AWE's emphasis).

It may be worth noting that when the boxer Cassius Clay converted to Islam and took the name Muhammad Ali under which he then boxed professionally, he spelled it this way.

Forms with final -t follow early European tradition. "Mahomet is considered an unacceptable rendering of the Prophet's name" (OED).
See also Koran - Qur'an for a related and similar difficulty with spelling in English. AWE also has an article on Islam.