The internalization of Islamic educational values is a fundamental process in shaping students’ character in integrated Islamic boarding schools (pesantren). Unlike conventional education systems, integrated pesantren provide a holistic learning environment where value internalization occurs continuously through formal learning, habituation, role modeling, and institutional culture. This study aims to examine the process of internalizing Islamic educational values in character formation using a literature review approach. Data were collected from national and international journals, Islamic education books, and relevant previous studies. The data were analyzed using a qualitative descriptive method through systematic review, interpretation, and synthesis. The findings indicate that internalization occurs through three stages: value transformation, value transaction, and value transinternalization. These stages are implemented through structured learning, habituation, and the exemplary behavior of kyai and ustadz within a strong pesantren culture. The internalized values include faith, morality, discipline, responsibility, independence, and social awareness, which are embedded in students’ daily practices. Furthermore, integrated pesantren strengthen this process through the integration of religious and general curricula and a boarding school system that supports continuous character formation. Intensive social interaction within the pesantren environment accelerates value internalization, positioning the institution as a living laboratory of character education. In conclusion, the internalization of Islamic educational values plays a crucial role in producing students with strong religious character, independence, and moral integrity. This study proposes an integrated conceptual framework of value internalization within pesantren as a model for holistic and sustainable character education.