Here's an extract from the book "
The Lawful And The Prohibited in Islam" by Sheikh Yousaf Al-Qaradawi, one of the leading scholars of Islam alive today.
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Chess is a very popular game, and the opinion of jurists concerning it varies. Some consider it halal, others makruh, and still others haram. Those who consider it haram cite some ahadith in support of their position, but researchers have proved that chess did not appear until after the death of the Prophet (peace be on him), thus all such ahadith must have been fabricated.
The Companions of the Prophet (May Allah be pleased with them) themselves held differing views about playing chess. Ibn 'Umar said that it is worse than backgammon and 'All regarded it as gambling (perhaps meaning when it is played for money), while some others merely expressed disapproval of it.
However, some Companions and some of the second generation scholars allowed it. Among these were Ibn 'Abbas, Abu Hurairah, Ibn Sirin, Hisham bin 'Umrah, and Sa'id bin al-Musayyib. We agree with these great jurists, since the original principle is the permissibility of acts and no text is to be found prohibiting it. Moreover, in addition to being a game and a recreation, chess is also a mental exercise which requires thought and planning. In this respect it is the opposite of backgammon, for while backgammon is a game of chance and therefore comparable to divining with arrows, chess is a game of skill and strategy which may be compared to archery.
However, playing chess is permissible only if the following three conditions are met:
1. One should not get so absorbed in it that he delays his salat; chess is well-known to be a stealer of time.
2. There should be no gambling involved.
3. The players should not utter obscenities or vulgarities.
If any of these conditions are not met it should be considered as haram.
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Taken from
http://www.qaradawi.net