The public discontent with which the work of Muḥammad Aḥmad Khalafallah (1916-1998) was met points to an ongoing crisis in modern Arabic literary thought. This paper will examine the critical deadlock that resulted in the expulsion of Khalafallah and the demonization of his scholarship on the Qur'an, with particular reference to his controversial dissertation, al-Fann al-Qaṣaṣi fī al-Qur’ān (1947/8) [Narrative Art in the Qur'an]. I specifically investigate the "jargon of authenticity" responsible for the rebuttal of critical method. Examining the principles of his theoretical approach to narrative logic in the Qur'an, I will argue that ultimately the matter of Khalafallah, like that of Ṭāhā Ḥusayn before him, marks a dilemma in Arabic literary critique: a conflict of priorities between hegemonic and counter-hegemonic critique, in which the former dismisses the latter as dialectical practice in atheism which can readily be dismissed once the serious guards of Islamic faith allude to it. Some of the questions this paper poses include the following: what are the intellectual grounds that make literary criticism particularly dangerous or sacrilegious? If Khalafallah’s case is intensified by by scholarly dislocation and intellectual alienation, how does his work enable us to rethink the modalities of modern Arabic literary criticism vis-à-vis tradition?