Short answer
Yes, if the prize comes from an organiser, sponsor or one side only, and the aim is to encourage learning. It becomes haram gambling (qimar) if all participants pay into a pot that the winners take. Entrants should guard their intention, since reciting to be praised is a serious sin.
Competitions in religious knowledge, including Quran recitation and memorisation, are permitted with a prize from a third party or from one side. A prize funded by stakes from every competitor is qimar and haram. A modest registration fee that only covers costs, with prizes paid by sponsors, is generally allowed.
The four schools agree on this.
Explanation
Competing in good is praised in the Quran: "For this let the competitors compete" (83:26). Quran competitions have encouraged millions of children and adults to memorise and perfect their recitation, and many famous reciters began in them. The Prophet ﷺ said the best of you are those who learn the Quran and teach it.
When it is allowed. The Hanafi scholars allow prizes in contests of beneficial knowledge, by analogy with the races the sunnah permits, as long as the prize is offered by one party or an outsider. A masjid, a school, a charity or a government giving prizes is fine.
When it becomes gambling. If each contestant pays in and the winner takes the money, every entrant risks his own stake to win the others'. That is qimar, which the Quran calls the work of Satan (5:90). Check how prizes are funded before entering.
Guard your heart. The Prophet ﷺ warned of a man on the Day of Judgement who will say he recited the Quran for Allah's sake, and will be told: you recited so that people would say you are a reciter, and it was said. Aim to please Allah, accept the result calmly, and do not belittle others. Parents and teachers should not push children in ways that make the Quran feel like pressure.
Other checks: mixed settings should keep Islamic etiquette, and recitation should follow tajweed rules rather than show. See is tajweed compulsory and the reward for memorising the Quran.
The evidence
Quran, Surah Al-Mutaffifin 83:26
خِتَٰمُهُۥ مِسْكٌۭ ۚ وَفِى ذَٰلِكَ فَلْيَتَنَافَسِ ٱلْمُتَنَٰفِسُونَ ﴿٢٦﴾
The last of it is musk. So for this let the competitors compete.
Competing in good deeds is praised.
Quran, Surah Al-Maaida 5:90
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
Pooled stakes turn a contest into forbidden gambling.
Sahih al-Bukhari 5027
Sahih... خيركم من تعلم القرآن وعلمه ...
"The best of you are those who learn the Quran and teach it."
Encouraging learning the Quran is a great good.
Sahih Muslim 1905
Sahih... قرأت القرآن ليقال هو قارئ ...
"You recited the Quran so that it would be said: he is a reciter."
Reciting for praise ruins the deed.
Where the ruling is recorded
- al-Durr al-Mukhtar, Kitab al-Hazr wa al-Ibaha, section on races and contests (musabaqa). Permits a prize from one side in races and extends it to contests in fiqh knowledge.
- Radd al-Muhtar (Ibn Abidin), Kitab al-Hazr wa al-Ibaha, section on races and contests. Explains why a prize funded by all contestants is qimar.
Checked by our team. For a more accurate answer to your own situation, consult a scholar. 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.