Advaita Vedānta treats karma and reincarnation as valid only within the realm of empirical experience, the domain of māyā and vyavahāra. At the ultimate level of truth, where only Brahman is real, there is no separate individual to act, to reap results, or to be reborn. The true Self (Ātman), identical with Brahman, is actionless and untouched by the play of cause and effect. What is commonly called the individual soul (jīva) is a product of ignorance (avidyā), associated with a subtle body that carries impressions and tendencies. Karma, with its network of actions and results, adheres to this subtle body and not to the pure Self. Thus, from the standpoint of non-dual knowledge, karma and rebirth are ultimately illusory, though they appear binding as long as ignorance persists.

Within the empirical order, however, karma functions as the law that governs the cycle of birth and death (saṃsāra). Actions leave impressions that shape future experiences, and the subtle body, bearing these karmic traces, transmigrates from one embodiment to another. As long as there are unfulfilled desires and karmic residues, the jīva continues to take birth, experiencing pleasure and pain in accordance with past deeds. This process is not denied but is understood as operating only so long as the sense of individuality and doership remains. The doctrine of different kinds of karma and the continuity of the subtle body serve to explain why lives appear patterned by moral causality, even though the underlying Self is ever free.

Advaita also assigns a provisional, yet important, role to karma in spiritual practice. Actions performed with detachment and the right attitude can purify the mind and prepare it for the dawn of Self-knowledge. Nevertheless, no accumulation of meritorious deeds can itself bring liberation, because liberation is not a produced result but the recognition of what has always been the case: the identity of Ātman and Brahman. When this knowledge arises, the apparent individual who was bound by karma is seen as never truly separate from the absolute. The liberated one may still appear to undergo the unfolding of prior karmic tendencies, yet remains inwardly untouched, established in the understanding that the real Self neither acts nor is reborn.