The committee in our Masjid in New York is thinking of having Islamic calligraphy of Quranic Ayah engraved inside as well as outside of Masjid (all around building). What is the Islamic ruling on this act? I mean isn't one of the Al-Saa'h decorating the Masjid? Please provide any Ayah or Hadeeth if any.

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.

The majority of the jurists are of the view that it is dislikeable to decorate the mosques with gold or silver, or engrave them, or write on them, or do any other thing that might distract  the praying person from his prayer. The Prophet said: "I have not been ordered to build high and lofty mosques." [Ibn Habbaan] Ibn 'Abbaas said: "Indeed you will embellish the mosques [and decorate them] in a similar way the Christians and Jews did to their places of worship."

Ibn Maajah reported the following Hadeeth: "I think that you are going to build large and magnificent windows to your mosques after my death in the same way the Jews did to their synagogues and the Christians did to their churches."

'Umar ordered mosques to be built and would say: "Protect people from the rain. Beware of red or yellow decorations as they distract people." Anas added: "But very few people will attend the mosques."

Moreover, the Prophet said: "The Hour will not come to pass until people would vie in boasting with each other in building mosques." [Abu Daawood]

Some companions, like Abu Hurayrah, Abu Ad-Dardaa', Abu Tharr, and Abu Sa'eed used to say: "If you decorate the Quran and the mosques, then await your destruction."

Imaam Maalik and Ahmad also disliked the decoration of the mosques, as the former said in Almudaawanah: "When mosques were decorated, people disliked it because that disturbed them from their prayer; they would look to such decorations and be distracted. I heard that when 'Umar Ibn 'Abdul-'Azeez was a Caliph, he wanted to remove the decorations from the mosques. But when he was told that by removing the decorations he would not get any gold [from the engraving on the walls], he left it." 

Some jurists among whom are the Hanbali School and one of the two opinions of the Shaafi'i School are of the view that it is forbidden to decorate the mosques with gold or silver, and any such decoration should be removed, because it is a waste of money, and that hurts the feelings of the poor. 

Ibn Al-Haajib said in relation to the evil that must be changed: "The decorations that have been introduced to the pulpits and other parts of the mosque have to be removed as that is an innovation and a sign among the signs of the Last Hour."

The jurists agreed [in a consensus] that it is not permissible to decorate the mosque or engrave it with endowment money, and whoever does so is responsible for the expenses and has to compensate the amount, as decorating the mosque is something prohibited and there is no benefit in it, and it is not considered as a part of the construction.

To conclude, decorating the mosque with different kinds of embellishment and engraving it with gold and silver and writing the verses of the Quran and the sayings of the Companions and righteous predecessors on its walls is something disliked, if not forbidden, especially if it distracts the praying people. 

Allaah Knows best.