Prior research on character formation in Islamic education has predominantly focused on curricular approaches and individual teacher roles, leaving institutional role modeling as an integrated value system within early childhood educational structures underexplored, particularly in the Malaysian-Indonesian cross-cultural context. This study aims to analyze institutional role modeling as a strategic pillar of Muslim student character formation at Tadika Perpaduan Batu Lancang, Penang, Malaysia, aligned with SDG 4 (Quality Education) and SDG 16 (Peace, Justice and Strong Institutions). Employing a descriptive qualitative approach, data were gathered through participatory observation and in-depth interviews with the principal, teachers, and institutional stakeholders, conducted within the framework of STIT Babussalam's International KPM-PPL Program. Findings reveal that institutional role modeling operates through three complementary dimensions: regulative (Sharia-based school rules), normative (Islamic social values), and cultural-cognitive (collective beliefs). The integration of these dimensions demonstrably cultivates an Islamic school culture that effectively internalizes noble character traits in students. These findings contribute to strengthening the institutional capacity of Islamic educational institutions as holistic character formation models and offer a replicable framework for education policy development in both Malaysia and Indonesia.