Short answer
Allah created Iblis as a jinn with free will. When he refused to bow to Adam out of pride, Allah let him live until the Day of Resurrection as a test for people (15:36-38). His whispers show who chooses Allah freely. He can only invite, not force, and he has no authority over Allah's sincere servants (15:42).
Sunni creed holds that Allah creates everything, including Shaytan, with wisdom, while He is not pleased with Shaytan's disbelief. Shaytan has no power to compel anyone (14:22); each person is accountable for following him. Seeking refuge in Allah from him is sunnah, especially before reciting the Quran.
The four schools agree on this.
Explanation
Iblis was a jinn who worshipped among the angels. When Allah commanded them to prostrate to Adam, he refused: "I am better than him. You created me from fire and created him from clay" (38:76). Pride turned him from a worshipper into the enemy of humanity. He asked for respite "until the Day they are resurrected", and Allah granted it (15:36-37).
Why allow it? Allah "created death and life to test you as to which of you is best in deed" (67:2). A test needs a real pull in two directions. Without temptation there would be no struggle, no repentance, and no victory of the soul. The Prophet ﷺ said that if people did not sin, Allah would bring a people who sin and seek forgiveness and He would forgive them. Repentance, mercy and forgiveness all show themselves through this test.
Shaytan's power is limited. On the Day of Judgement he will tell his followers: "I had no authority over you except that I invited you, and you responded to me. So do not blame me; but blame yourselves" (14:22). And Allah says: "Indeed, My servants, no authority will you have over them, except those who follow you" (15:42). The Prophet ﷺ said Shaytan runs in the son of Adam like blood, and each person has a jinn companion assigned to him (a qareen), yet the believer is never helpless.
Your protection is in Allah: dhikr, prayer, the Quran, and saying a'udhu billahi minash-shaytanir-rajim. See also Is Shaytan an angel? and Did Allah create evil?
The evidence
Quran, Surah Al-Hijr 15:36-37
قَالَ رَبِّ فَأَنظِرْنِىٓ إِلَىٰ يَوْمِ يُبْعَثُونَ ﴿٣٦﴾ قَالَ فَإِنَّكَ مِنَ ٱلْمُنظَرِينَ ﴿٣٧﴾
He said, "My Lord, then reprieve me until the Day they are resurrected." [Allah] said, "So indeed, you are of those reprieved
Allah gave Iblis respite as part of the test.
Quran, Surah Al-Hijr 15:42
إِنَّ عِبَادِى لَيْسَ لَكَ عَلَيْهِمْ سُلْطَٰنٌ إِلَّا مَنِ ٱتَّبَعَكَ مِنَ ٱلْغَاوِينَ ﴿٤٢﴾
Indeed, My servants - no authority will you have over them, except those who follow you of the deviators.
Shaytan has no authority over sincere servants.
Quran, Surah Ibrahim 14:22
وَقَالَ ٱلشَّيْطَٰنُ لَمَّا قُضِىَ ٱلْأَمْرُ إِنَّ ٱللَّهَ وَعَدَكُمْ وَعْدَ ٱلْحَقِّ وَوَعَدتُّكُمْ فَأَخْلَفْتُكُمْ ۖ وَمَا كَانَ لِىَ عَلَيْكُم مِّن سُلْطَٰنٍ إِلَّآ أَن دَعَوْتُكُمْ فَٱسْتَجَبْتُمْ لِى ۖ فَلَا تَلُومُونِى وَلُومُوٓا۟ أَنفُسَكُم ۖ مَّآ أَنَا۠ بِمُصْرِخِكُمْ وَمَآ أَنتُم بِمُصْرِخِىَّ ۖ إِنِّى كَفَرْتُ بِمَآ أَشْرَكْتُمُونِ مِن قَبْلُ ۗ إِنَّ ٱلظَّٰلِمِينَ لَهُمْ عَذَابٌ أَلِيمٌۭ ﴿٢٢﴾
And Satan will say when the matter has been concluded, "Indeed, Allah had promised you the promise of truth. And I promised you, but I betrayed you. But I had no authority over you except that I invited you, and you responded to me. So do not blame me; but blame yourselves. I cannot be called to your aid, nor can you be called to my aid. Indeed, I deny your association of me [with Allah] before. Indeed, for the wrongdoers is a painful punishment."
Shaytan can only invite, not compel.
Sahih al-Bukhari 2039
Sahih... إن الشيطان يجري من ابن آدم مجرى الدم ...
"Shaytan runs in the son of Adam as blood runs."
Shows how close his whispering is, so vigilance is needed.
Sahih Muslim 2749
Sahih... لو لم تذنبوا لذهب الله بكم ولجاء بقوم يذنبون ...
"If you did not sin, Allah would take you away and bring a people who sin and then seek forgiveness."
The test of sin and repentance is part of Allah's wisdom.
Where the ruling is recorded
- al-Fiqh al-Akbar (Imam Abu Hanifa), Section on Allah's will and pleasure. Explains that sins happen by Allah's will but not His pleasure.
- Akam al-Marjan fi Ahkam al-Jann (al-Shibli al-Hanafi), Chapter on Iblis. A Hanafi work that discusses Iblis, his origin and his limits.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.