Beheadings, suicide and a Catholic orphanage all feature in the finalists for the National Short Story Prize.
Kureishi earned an Oscar nomination for My Beautiful Launderette
Hanif Kureishi is nominated for Weddings and Beheadings, a story about an ambitious cameraman who ends up filming terrorist beheadings.
Jackie Kay is nominated for How To Get Away with Suicide and Julian Gough is shortlisted for The Orphan and The Mob.
David Almond and Jonathan Falla complete the five-strong list. The winner will be announced on 23 April.
Almond is shortlisted for Slog's Dad, about a childhood in Tyneside, while Falla's The Morena focuses on a woman trapped in domestic service at the fringes of El Salvador's civil war.
Chair of the judging panel, broadcaster Mark Lawson, said: "This prize exists partly because many, perhaps even most, publishers and literary editors still regard the novel as the most important form of story-telling and are suspicious of short stories.
"But this year's selection makes very clear that there is no connection at all between word-count and the scale of subject-matter or characterisation that can be achieved."
Kureishi is famous for novels such as The Buddha of Suburbia and Intimacy, as well as screenplays including My Beautiful Launderette and the recent Peter O'Toole hit, Venus.
The award, now in its second year, received 428 entries. The winning author earns £15,000, and the runner up will take home a cheque for £3,000.