Question: What is the explanation of the hadîth-i sharîf, “Allah is beautiful and loves what is beautiful”?
The more appropriate translation of the hadîth you have mentioned is as follows:
(Allahu ta’âlâ is Jamîl and loves those who possess jamâl.) [Muslim]

Jamâl is to show one’s blessings in order to remove ugliness, to have dignity and honor, and to express gratitude. However, it is not jamâl, but conceit, to show one’s blessings in order to show off and boast. The above-mentioned hadîth-i sharîf extols the merit of having jamâl. In this regard, it is good to be neat and tidy in everything. Jamîl means beautiful. Hasan means beautiful, too. But there is difference between these two, like the difference between a beautiful building or beautiful scenery and a beautiful girl. So is the case with love. The love of Allah is quite different from the love of children, parents, wives, or flowers. Like love, beauty is of different kinds. It is declared in the Holy Qur’an, “Allah created everything beautifully.” (Sûrat-us-Sajdah, 7)

There is certainly beauty, art, and harmony in everything Allahu ta’âlâ has created, which leave no room for the thought of a better creation. The Qur’ân al-karîm declares, “We created human beings in the best from.” (Sûrat-ut-Tîn, 4)

Our organs are neither more nor less than necessary. It is not even possible to imagine a better creation than the existing digestive system and other bodily systems. It would not be more perfect if we had one or three ears. The case is the same with the other organs. All perfect attributes exist in Allahu ta’âlâ, and no defective attributes exist in Him. That is, He is beautiful in every respect. His names, too, are beautiful. The Qur’ân al-karîm says: “The most beautiful names [Asmâ-ul-husnâ] belong to Allah. Invoke Him by these beautiful names.” (Sûrat-ul-A’râf, 180)

Allahu ta’âlâ uses the word husnâ (the most beautiful) for Jannah (Paradise) and the Qur’ân al-karîm as well:
(Follow the most beautiful [the Qur’ân al-karîm] of what has been sent down to you from your Rabb!) [Sûrat-uz-Zumar, 55]

(Allah promised the most beautiful [that is, Paradise] to all [of the Ashâb-i kirâm].) [Sûrat-un-Nisâ’, 95]

(To all [of the Ashâb-i kirâm] We promised the husnâ [Paradise].) [Sûrat-ul-Hadîd, 10]

Likewise, the loan which is lent without charging any interest and only for the sake of Allah is termed qard-i hasan, which means beautiful loan. (Sûrat-ul-Mâ’ida, 12)

The sabr (patience) which meets the conditions of our religion is called sabr-i jamîl (beautiful patience). (Sûrat-u Yûsuf, 18; Sûrat-ul-Ma’ârij, 5)

Besides, the women of Paradise are described as beautiful in countenance and character. (Sûrat-ur-Rahmân, 70)

Instead of performing a lot of namâz and observing a lot of fasts, that is, instead of a lot of acts of worship, it is necessary to perform them beautifully. It is said in the Qur’ân al-karîm, “In order to test you as to whose deeds are more beautiful…” (Sûrat-u Hûd, 7; Sûrat-ul-Kahf, 7; Sûrat-ul-Mulk, 2)

The following is declared in ahâdîth concerning the beautiful and beauty:
(Seek what is good and goodness near the people with beautiful faces.) [Bayhaqî]

(Let the representative you will send to me have beautiful face and name.) [Bazzar]

(If Allahu ta’âlâ has bestowed a beautiful creation and beautiful moral qualities upon a person, He never puts him in the Fire.) [I. Adiy]

(If Allahu ta’âlâ has bestowed a beautiful face and a beautiful name upon a person and if he, in turn, does not put them in a disgraceful position, he will become one of the selected.)

(The face of a person who performs a lot of namâzes at nights will be beautiful.) [Mawqûfât]

(The most beautiful of the beautiful is beautiful morals.) [Ibni ‘Asâkir]

(Islam means beautiful morals.) [Daylamî]

(Beautiful hair, beautiful voice, and beautiful face may cause fitnah.) [Daylamî]

(Beauty is more beautiful on some types of people: Justice is beautiful, but it is more beautiful on administrators. Generosity is beautiful, but it is more beautiful on the wealthy. Warâ is on savants, patience is on the poor, repentance is on the young are more beautiful. Modesty is beautiful, but it is more beautiful on women.) [Daylamî]

One of the awliyâ’ said, “A person’s being a walî is understood from the following: He has a sweet tongue, beautiful morals, a smiling face, and generosity. He never quarrels. He accepts the apologies and shows mercy upon everyone.”