(Taken from the book titled 'Common Questions People Ask About Islam' by Shabir Ally.)

Islam teaches that homosexual acts are sinful and punishable by God. This teaching comes not from human beings, but from the Creator of all humans. God tells us in His own words how He punished the people of Lot for their homosexual behaviour. The story of prophet Lot, on whom be peace, finds mention in several Qur'anic passages, especially Chapter 26:160-175 which reads:
"The people of Lut rejected the apostles. Behold, their brother Lut said to them: "Will ye not fear (God)? "I am to you an apostle worthy of all trust. "So fear God and obey me. "No reward do I ask of you for it: my reward is only from the lord of the Worlds. "Of all the creatures in the world, will ye approach males, "And leave those whom God has created for you to be your mates? Nay, ye are a people transgressing (all limits)!"

They said: "If thou desist not, O Lut! thou wilt assuredly be cast out!" He said: "I do detest your doings." "O my Lord! deliver me and my family from such things as they do!" So We delivered him and his family,- all Except an old woman who lingered behind. But the rest We destroyed utterly. We rained down on them a shower (of brimstone): and evil was the shower on those who were admonished (but heeded not)! Verily in this is a Sign: but most of them do not believe. And verily thy Lord is He, the Exalted in Might Most Merciful." From these passages we learn that God saved Lot and the righteous ones of his family, and rained on the rest a shower of brimstone, so they were utterly destroyed. This is mentioned in the Qur'an not only for the sake of information, but mainly to serve as a warning to anyone who dares to repeat such acts. Muslim believe that every human action leads to consequences. Good actions entail good results, and evil actions entail evil consequences. Some of these consequences may not become known for many years after a certain action. The consequences of some actions will become manifest only after death when one enters a new, everlasting life.... A common mistake among humans is that if they don't see any negative consequences for their actions they consider it harmless. Human experience has taught us that a source of superior knowledge can be of tremendous benefit to humans....

God, the source of all knowledge, warns us of His punishment if people perpetrate homosexual acts. Let us pay attention and learn the easy way. Some will say that a person may be born with homosexual tendencies. We say that everyone is a free agent. God lays before us two paths and has given us knowledge of where these paths lead. One is the path to which the devil call us. We must avoid that. One is the path leading to paradise. We must stick to that one. Everyone experiences evil prompting from time to time. We must resist those with all our might. If one feels a tendency to do something that God prohibits, he or she should seek help from a community of loving, caring, believers who would understand his or her difficulty and help him or her overcome it. A common ploy of the devil is to convince people that they cannot avoid sin. Then they do not even try. But God promises that the devil can have no lasting power over those who sincerely seek God (see Qur'an 15:42)

Finally, our bodies are given to us in trust from God. One should not use his or her body contrary to the user guide provided by its Maker. Consenting adults also need God's consent.

For further reading on this issue please refer to the following sites:
http://www.angelfire.com/ak/BaltoMuslims/hom.html
http://www.soundvision.com/parenting/disney.anti-family.shtml
http://www.soundvision.com/parenting/tv.homo.shtml