Character education has become increasingly important in addressing moral, social, and behavioral challenges among students in contemporary educational settings. In Islamic education, the Rahmatan lil ‘Alamin paradigm offers a distinctive framework for character formation by emphasizing compassion, tolerance, justice, balance, respect for diversity, and social responsibility. However, the effectiveness of its implementation in developing students’ character requires systematic assessment. This study aims to assess the effectiveness of Rahmatan lil ‘Alamin-based character education in fostering students’ character development. The study employed a qualitative evaluative approach to examine the implementation of character education within an Islamic educational context. Data were collected through observations, semi-structured interviews, and document analysis involving school leaders, teachers, and students. The data were analyzed thematically through data reduction, categorization, interpretation, and triangulation. The findings indicate that the implementation of Rahmatan lil ‘Alamin-based character education contributes positively to students’ character development, particularly in the areas of tolerance, responsibility, discipline, empathy, respect for differences, cooperation, and religious moderation. Its effectiveness is supported by the integration of Rahmatan lil ‘Alamin values into learning activities, religious practices, school culture, teacher role modeling, and students’ daily interactions. Nevertheless, several challenges remain, including differences in students’ character backgrounds, consistency in teacher modeling, parental involvement, and the sustainability of character-building practices. The study concludes that Rahmatan lil ‘Alamin-based character education provides a relevant and contextual approach to strengthening students’ character development when implemented systematically and supported by a consistent institutional culture. The findings highlight the importance of strengthening school policies, teacher capacity, and collaborative engagement among schools, families, and communities to ensure the sustainability of character education.