Sculpting with clay is one of the kinds of image-making, some of which is permissible and some is haraam. That which is haraam is that which shows images of animate beings, both humans and animals, because of the words of the Prophet (peace and blessings of Allaah be upon him) which were narrated by Ibn ‘Abbaas, who said: I heard Muhammad (peace and blessings of Allaah be upon him) say: “Whoever makes an image in this world will be commanded to breathe the soul into it on the Day of Resurrection, and he will not be able to do that.” Narrated by al-Bukhaari (2112) and Muslim (2110).
As for that which is permissible, it is images of anything that does not have a soul, so it is permissible to sculpt images in clay of mosques, houses, trees and other inanimate objects.
The scholars of the Standing Committee said:
The focus of the prohibition on image making is images of animate beings, whether they are sculpted or drawn on walls or fabric or paper, or they are woven, and whether they are drawn with a quill or pen or made with a machine, and whether the image is of the creature as it naturally appears or whether imagination comes into play and it is made smaller or larger, or made beautiful or distorted, or the skeleton inside is shown in the picture.
The reason for the prohibition is that what is represented is animate beings, even if they are imaginary images such as those that are drawn to represent ancient peoples such as the pharaohs and commanders and soldiers during the Crusades, or images of Jesus and Mary that are placed in churches, etc. This is because of the general meaning of the texts and because of the imitation of the creation of Allaah, and because it is a means that leads to shirk.
Shaykh ‘Abd al-‘Azeez ibn Baaz, Shaykh ‘Abd al-Razzaaq ‘Afeefi, Shaykh ‘Abd-Allaah ibn Ghadyaan, Shaykh ‘Abd-Allaah ibn Qa’ood.
Fataawa al-Lajnah al-Daa’imah (1/696)