In the name of Allah the most Beneficent and Merciful,

The correct position of the majority of the scholars is that the Prophet`s (May Allah bless them and grant him peace) parents dwell in paradise as Ahl al Fitra, the people of primordial state. One of the attributes by which the Prophet (May Allah bless them and grant him peace) is known amongst the major schools is Karim al Tarafayn, or “Noble in both male and female ancestors”.

Wathila ibn al Asqa said that the Prophet (May Allah bless them and grant him peace) said “Allah purified and chose from among the children of Ibrahim, Ishmael and Banu Kinana and He purified and chose from among the Banu Kinana the Quraysh and He purified and chose from among the Quraysh the Banu Hashim and He purified and chose me from among the Banu Hashim. (Sahih Muslim)

The great Hadith Master and scholar Imam Jalaluddin Suyuti (May Allah have mercy on him) wrote at least FIVE Fatwas on the proof of the parents being believers

1. Al Duruj al Munifah fi al Abah al Sharifah (The outstanding entries concerning the Prophet`s ancestors)

2. Al Maqamat al Sundusiyyah fi al Nisbah al Mustafawiyyah (The resplendent stations concerning prophetic ancestry).

3. Subul al Jaliyyah fi al Aba al Aliyyah (The manifest paths concerning the lofty ancestors [of the Prophet])

4. Nashr al Alamayn al munifayn fi ihya al abawayn al sharifayn (the proclamation to the two outstanding worlds [mankind and jinn] concerning the Prophet`s parents).

5. Al Tazim wa al minna fi anna abaway rasulillahi fi al jannah (magnification and gratitude for the Prophet`s parents being in paradise)

In addition to the above he writes over 44 Hadiths in refutation to those who misread the Hadith of the Prophet`s father being in the fire in his following treatise and magnificent masterpiece `Masalik al Hunafa Fi Waladayy al Mustafa` (Methods of those with pure belief concerning the parents of the Prophet).

Imam Suyuti concludes;

“The majority of the scholars have agreed that the Prophet`s parents are in paradise, without need for them to consider the two Hadith of Muslim to be abrogated. However as Al Suhayli has pointed out, `it is not appropriate for Muslims to say such things as “the Prophet`s parents are in the fire” as he himself said “Do not annoy the living by insulting the dead”, and Allah said “Those who annoy Allah and the Prophet, Allah curses them in this life and the hereafter” (33:57).”

Al Qadi Abu Bakr Ibn al Arabi the Maliki scholar was asked about the man who did say such a statement, and he replied “Such a man is cursed”.

Finally a portion of the scholars have gone to the position of withholding their opinion and Allah knows best.

Some accuse Imam Abu Hanifa as per Mulla Ali Qaris work Fiqh Al Akbar of having this opinion but this is not true. You can see the explanation of Mullah Ali Qari`s answer on the following link

http://www.masud.co.uk/ISLAM/misc/parents.htm

Of course Allah knows best
[Answer provided by: Muhammad Salim Ghisa]