Why did God instruct Abraham to sacrifice Isaac?

First, let’s explore the customs and traditions of ancient times and their sacrifices.

Human sacrifice was not unknown in the ancient Near East, though early examples of it are rare. A "substitute king" seems to have been sacrificed in Mesopotamia at the end of his brief "reign." Prisoners or foreigners were sacrificed at the dawn of Egyptian history, but the practice died out early. While skeletons of infant children have been found buried in the floors of Palestinian houses, this doesn't prove child sacrifice. But human sacrifice does seem to have been practiced by the "Sea Peoples" who settled along the coast -- Phoenicians and Canaanites. In the sanctuary of Tanit at Carthage, archaeologists have discovered urns containing burnt bones of lambs and goats, and more often, of children, where the sacrifice of the finest children is attested in 310 BC. Two steles from Malta from the seventh or sixth century BC indicate that child sacrifice was practiced. Philo of Byblos says that the Phoenicians had an ancient custom -- "they offered their dearest children in a way full of mystery" when danger threatened the nation. In Bible times, the King of Moab offered his son as a burnt offering when his capital was under siege (2 Kings 3:27).

This Canaanite and Phoenician practice came into Israel under apostate kings when Ahaz "made his son pass through the fire" (2 Kings 16:3) and Manasseh did the same (2 Kings 21:6). The custom was probably fairly widespread, since it prompted condemnations of the practice in the Bible (Leviticus 18:21; 20:2-5; Deuteronomy 18:10; 2 Kings 17:17; 21:6; 2 Chronicles 28:3; 23:10; Psalm 106:37-38; Jeremiah 19:4-5; 32:35).

But Abraham didn't have the benefit of God's revelation to Moses and the prophets, of the Old Testament scriptures. All he knew was that child sacrifice was practiced by some of the Canaanites. Instead of being morally incensed by the practice (as we are, with our knowledge of God's revealed will), Abraham had no option but to believe that God seriously demanded that he sacrifice his son as a "burnt offering," that is, a sacrifice that is fully consumed by the fire upon the altar.

And so Abraham prepared to go to "the region of Moriah." In the only other occurrence of this place name in the Old Testament it refers to Jerusalem, a city built upon several hills on the ridge of the north-south mountain chain.

"Then Solomon began to build the temple of the Lord in Jerusalem on Mount Moriah, where the Lord had appeared to his father David. It was on the threshing floor of Araunah the Jebusite, the place provided by David" (2 Chronicles 3:1).

We're not sure what the name Moriah means, but it may be something like "my teacher is Yah" or "the land which is the king's."

You can read further about ancient practices of human sacrifice here: http://en.wikipedia.org/wiki/Human_sacrifice

Further many occultist still practice this abomination, you can read about this crap here: http://usminc.org/humansacrifice.html

Not only do we have a clearer picture of what the world was like in this age but we also can obtain a higher understanding of what a truly loving God was facing in his attempts to bring his children of the world to a higher walk in compassion.

So the actual sacrifice is recording as follows:

Abraham is living near a well at Beer-sheba on the edge of the Negev desert at the southern extremity of Canaan (20:33-34; 22:19). Here in Beer-sheba he had "called upon the name of the LORD, the Eternal God" (21:33) and here in Beer-sheba God speaks to him a fearful word.

"Some time later God tested Abraham. He said to him, 'Abraham!'

'Here I am,' he replied.

Then God said, 'Take your son, your only son, Isaac, whom you love, and go to the region of Moriah. Sacrifice him there as a burnt offering on one of the mountains I will tell you about.'"

There is no mistake about who this is who is speaking to him. Abraham has heard God's voice many times during his lifetime. He knows the voice. It is not the voice of an enemy, but a friend. But the message must have brought agony to Abraham's heart. We'll discuss the word "tested" (Hebrew nāsā) in verse 1 in a few minutes.

"By faith Abraham, when God tested him, offered Isaac as a sacrifice. He who had received the promises was about to sacrifice his one and only son, even though God had said to him, 'It is through Isaac that your offspring will be reckoned.' Abraham reasoned that God could raise the dead, and figuratively speaking, he did receive Isaac back from death." (Hebrews 11:17-19)

But this was no play-acting for Abraham, no "slam-dunk." He fully intended obey God -- but at the same time there were those promises pointing to Isaac. Somehow, he hoped and prayed, God would intervene.

Isaac was old enough to sense something amiss.

"Abraham took the wood for the burnt offering and placed it on his son Isaac, and he himself carried the fire and the knife. As the two of them went on together, Isaac spoke up and said to his father Abraham, 'Father?'
'Yes, my son?' Abraham replied.
'The fire and wood are here,' Isaac said, 'but where is the lamb for the burnt offering?'
Abraham answered, 'God himself will provide the lamb for the burnt offering, my son.' And the two of them went on together."

 After preparations are made by establishing the sacrifice alter Abraham reaches for the knife. "Slay" (NIV, KJV) or "kill" (NRSV) is the Hebrew verb shāhat, "kill, slaughter." Rabbinic sources indicate that an animal to be sacrificed was killed in "the swiftest and most painless way possible, by cutting horizontally across the throat in an uninterrupted movement." In a moment, that is exactly what Abraham will do -- to his son!

But just before that point, the angel -- who now speaks with the voice of Yahweh -- stops Abraham.

"But the angel of the Lord called out to him from heaven, 'Abraham! Abraham!'
'Here I am,' he replied.
'Do not lay a hand on the boy,' he said. 'Do not do anything to him. Now I know that you fear God, because you have not withheld from me your son, your only son.'"

God stops him from sacrificing Isaac on the altar, but not from worship:

"Abraham looked up and there in a thicket he saw a ram caught by its horns. He went over and took the ram and sacrificed it as a burnt offering instead of his son. So Abraham called that place The Lord Will Provide (Yahweh-yir’eh). And to this day it is said, 'On the mountain of the Lord it will be provided.'

Traditionally theologians equate this with God testing Abrahams faith so that Satan could not undermine him.  God also tests us in order to show off our character to others. Job doesn't understand why he was suffering, but in God's eyes, his faithfulness is a showpiece of character that Satan's attacks cannot undermine.

However if I have learned anything, the omnipresence of our Father and wisdoms are beyond ages and time, this event and words spoken would be eternally pregnant with omni-resonate meaning.

Here are several meanings which have grown from within me;

1.)    The first actual voice which commanded Abraham was not the voice of God but rather Satan or a lesser god which roamed the land attempting to manipulate Abraham and Gods promise of his seed, thus Gods voice again telling Abraham later to not slay Isaac.

2.)    Another view is that God used this opportunity to show Abraham that in fact he was a loving and merciful God and did not want human sacrifice like the other pagan gods demanded throughout the world.

3.)    Finally I resolved that the great I AM hated the sacrifices all together because he created all things including the animals and the sacrifice of Isaac was an illustrations of how one would feel if their own children were sacrificed, that it would not be pleasing but rather disturbing and disheartening. I have to lean to this truth within the event as well since the mission of Christ himself was to be the final sacrifice and end all sacrificial rituals.

So as you can see, logically all these lessons are present in this one event. May God bless you and may you achieve his profound wisdom in your heart!