The Prophet (صلى الله عليه وسلم) used to raise his hands for takbeerat al-ihram (the takbeer at the beginning of the prayer), sometimes whilst saying the takbeer, sometimes after it and sometimes before. (al-Bukhari and al-Nisaa’i)
When he had finished reciting Qur’an, he would pause for a moment then raise his hands, say takbeer and do rukoo’. (Sifat Salaat al-Nabi (صلى الله عليه وسلم), p. 128).

He used to raise his hands when he stood up from rukoo’ (reported by al-Bukhari and Muslim), and this raising of the hands is mutawaatir (reported by so many to so many that it is inconceivable that they could all have agreed on a lie). It is the opinion of the majority of scholars and of some of the Hanafis. (Sifat Salaat al-Nabi (صلى الله عليه وسلم) by al-Albani, p. 136).

Narrated by al-Bukhari (no.735) and Muslim (no.390) from ‘Abdullah ibn ‘Umar (may Allah be pleased with him), who said that the Messenger of Allah (صلى الله عليه وسلم) used to raise his hands to shoulder level when he started to pray, when he said “Allahu akbar” before bowing in rukoo’, and when he raised his head from rukoo’.

What The Scholars Have Said:

The majority of scholars followed this hadeeth and said that it is mustahabb for the worshipper to raise his hands at the points mentioned in the hadeeth.

Imaam al-Bukhari (may Allah have mercy on him) wrote a separate book on this issue which he called Juz’ fi Raf’ al-Yadayn (Section on Raising the Hands), in which he proved that the hands should be raised at these two points on the prayer, and he strongly denounced those who go against that. He narrated that al-Hasan said: “The Companions of the Messenger of Allah (صلى الله عليه وسلم) used to raise their hands during prayer when they bowed and when they stood up (from bowing).” Al-Bukhari said, “Al-Hasan did not exclude any of the Sahaba from that, and it was not proven that any one among the Sahaba did not raise his hands.”

Imaam al-Bukhari said: “Al-Hasan and Humayd ibn Hilaal said: ‘The Companions of the Messenger of Allah (صلى الله عليه وسلم) all used to raise their hands, without exception.” (Juz’ raf’ al-yadayn, p. 26, ma’a jila’ al-‘aynayn).

Ibn al-Qayyim said: “Look at the practice at the time of the Prophet (صلى الله عليه وسلم), and the Sahaba after him. They used to raise their hands in prayer when doing rukoo’, and when standing up again. And in the time of the Sahaba, if ‘Abdullah ibn ‘Umar saw someone not raising his hands in prayer, he would throw a stone at him. [next phrase is unclear]. (I’laam al-Muwaqqi’een, 2/376).

Az-Zayla’I (who was a Hanafi Scholar) said: in Nasb ar-Rayah, quoting from Juz’ Raf‘i-l-Yadayn of al-Bukhari, “ibn al-Mubarak used to raise his hands and he is the most knowledgeable of the people of his time as far as is known.
Ibn al-Mubarak said, ‘I prayed beside Nu‘man (Abu Haneefah’s real name) and I raised my hands so he said to me, “I fear that you are trying to fly.” I replied to him saying, “if I did not try to fly at the first [raising] then I was not trying to fly at the second.” ’ al-Waki said, ‘may Allah have mercy upon ibn al-Mubarak, he used to have his answers ready.’ ”

Abu Eesa [at-Tirmidhi] said; al-Fadl bin as-Sabbah al-Baghdadi narrated to us; Sufyan bin Uyaynah narrated to us; az-Zuhrî narrated to us; the likes of the hadeeth of ibn ‘Umar (Bukhari no.735) with this isnad

Abu Eesa said: the hadeeth of ibn Umar (Sahih Bukhari #735 #736 #737 #738 #739 ) is hasan sahih and some of the People of Knowledge from the Companions of the Prophet (صلى الله عليه وسلم) held this view [stated in the hadîth].
From amongst them were: ibn ‘Umar, Jabir bin ‘Abdullah, Abu Hurayrah, Anas, ibn ‘Abbas, ‘Abdullah bin Zubair and others.
From amongst the Tabi‘een were: Hasan al-Basri, Ata, Tawus, Mujahid, Nafi‘, Salim bin ‘Abdullah, Sa‘id bin Jubair and others
And of this opinion were Maalik, Ma‘mar, Awzaa’i, Sufyan ibn ‘Uyaynah, Abdullah Ibn Mubarak, ash-Shafi’ee, Ahmad and Is’haq

Ibn Hibban said :in as-Salah, ‘this is the best narration that the people of Kufah narrate with regards to negating raising the hands in prayer at the ruku’ and at rising from it. In reality it is the weakest of things to depend on because it has defects that invalidate it’

Ibn Taymiyyah Said: “If a man is following Abu Haneefah or Maalik or al-Shafi’ee or Ahmad (Ibn Hanbal), and he sees that the view of another madhhab concerning a given matter is stronger, and he follows that, then he has done well, and that does not detract from his religious commitment or good character. There is no scholarly dispute on this point. Rather this is more in accordance with the truth and is more beloved by Allah and His Messenger.”
(Said by Shaykh al-Islam – may Allah have mercy on him – in al-Fataawa, 22/247).

Concearning The Hanafis of The Indian Sub Continent

(note: There is a story which is widespread among the Hanafis in the Indian sub-continent that the Prophet (صلى الله عليه وسلم) only raised his hand because the people praying behind him (صلى الله عليه وسلم) were munafiqs who had idols under their arms, as strange as it sounds majority of the Hanafi’s of India, Pakistan & Bangladesh still believe this story, obviously this story is fabricated and we have  debated with Deobandi Maulana’s who admitted they don’t have any evidence as to where this story came from)

We do not know whether the ahaadeeth about raising the hands reached Abu Haneefah (may Allah have mercy on him) or not, but they did reach his followers. But they did not follow them because they had other ahaadeeth and reports which said that the hands should not be raised except when saying “Allahu akbar” at the beginning of the prayer.
These ahaadeeth include the following:

1) The hadeeth narrated by Abu Dawood (749) from al-Baraa’ ibn ‘Aazib, which says that the Messenger of Allah (صلى الله عليه وسلم) used to raise his hands almost to his ears when he started to pray, then he did not repeat (this action).
2) The hadeeth narrated by Abu Dawood (748) from ‘Abdullah ibn Mas’ud (may Allah be pleased with him) who said: “Shall I not lead you in prayer as the Messenger of Allah (صلى الله عليه وسلم) did?” Then he prayed and he only raised his hands once.
See Nasb al-Raayah by al-Zayla’i, 1/393-407.

But these ahaadeeth were classed as da’eef (weak) by overwhelming majority of the Imams of hadeeth.

The hadeeth of al-Baraa’ (Abu Dawud no.749) was classed as da’eef by Sufyaan ibn ‘Uyaynah, al-Shaafi’ee, al-Humaydi the shaykh of al-Bukhari, Ahmad ibn Hanbal, Yahya ibn Ma’een, al-Daarimi, al-Bukhari, and others.

The hadeeth of Ibn Mas’ud (Abu Dawud no.748) was classed as da’eef by ‘Abdullah ibn al-Mubarak, Ahmad ibn Hanbal,  Yahya bin A’dham, Abu Dawood, al-Bukhari, al-Bayhaqi, Ibn Hibban, al-Daaraqutni and others.

Similarly, the reports which were narrated from some of the Sahaba about not raising the hands are all da’eef.

Abdullah ibn al-Mubarak said: “the hadeeth of the one who raises his hands is established,” and he mentioned the hadeeth of Salim (Ibn Abdullah) from his father (Ibn Umar), “and the hadeeth of ibn Mas’ud is not established

We have quoted above the words of al-Bukhari (may Allah have mercy on him): “…it was not proven that any one among the Sahaba did not raise his hands.”
See Talkhees al-Habeer by al-Haafiz ibn Hajar, 1/221-223.

Once it is proven that these ahaadeeth and reports which say that the hands should not be raised are weak, then the ahaadeeth which say that the hands should be raised remain strong with no opposing reports.

Hence the believer should not fail to raise his hands at the points in prayer described in the Sunnah. He should strive to make his prayer like the prayer of the Prophet (صلى الله عليه وسلم)
who said, “Pray as you have seen me praying.” (Narrated by al-Bukhari, 631).

Hence ‘Ali ibn al-Madeeni, the Shaykh of al-Bukhari, said: “It is the duty of the Muslims to raise their hands when they bow in rukoo’ and when they stand up from rukoo’.” Al-Bukhari said: “ ‘Ali was the most knowledgeable of the people of his time.”

So what is proven in the Sunnah with regard to raising the hands in prayer is that they should be raised at four points in the prayer:
1.when pronouncing takbeerat al-ihraam,
2.when going for rukoo’,
3.when standing up from rukoo’,
4.after standing up from the first tashahhud.

And Allah knows best.

(Article compiled from the works of Shaykh Salih al-Munajjid & Abu al-Ala Muhammad al-Mubarakpuri)