Question: Regarding the life of the Prophet (peace be upon him), is he (peace be upon him) alive in his grave, in the worldly sense, with the return of his soul to his body, or is he alive in the sense of the life of Al-Barzakh (period between death and the Resurrection) with no legal liabilities or obligations? The Prophet (peace be upon him) said, during his final illness, “O Allaah! With the highest companions (i.e. The prophets in the highest part of Paradise).” Is his body as it was when it was placed in the grave, without a soul, and his soul is in the highest part of `Illiyyoon (a register inscribed, to which the angels bear witness) and it will join his body on the Day of Resurrection? Allaah (Exalted be He) says: And when the souls are joined with their bodies, (the good with the good and the bad with the bad).
Answer: Our Prophet (peace be upon him) is living in his grave the life of Al-Barzakh, so he is enjoying the blessings that Allaah has prepared for him as a reward for the wonderful deeds he performed in this world. But his soul has not joined his body to be alive in the grave as it was in this world, because life in the grave is not like the life of this world, or the life in the Hereafter; it is the life of Al-Barzakh, which comes between life in this world and life in the Hereafter… read more here.