This research examines the scope and extent of internalization of the values of religious moderation, wasathiyah, tasamuh, i'tidal, and inclusivity, as well as their internalization and the subsequent behavioral outcomes at Pondok Pesantren Baitul Mubarok, Indonesia. This study is a qualitative case study that examines mechanisms of internalization of religious moderation values in Baitul Mubarok Islamic Boarding School, Kubu Raya. Data for the study include transcripts of in-depth interviews, field notes, curriculum documents, and policies of Islamic boarding schools. Data are from 10 key informants, consisting of the Islamic boarding school headmaster, teachers, and students, as well as documentation. Data were collected through participant observation, semi-structured interviews, and document review. Data analysis used the thematic analysis process of data reduction, data display, and conclusion drawing. The findings suggest that the internalization of the values is the result of the functioning of an internalized complete system, which utilizes five primary mechanisms: key transformative leadership role modeling, daily routines’ institutionalized habituation, critical dialogues within the halaqah system, curriculum integration, and a curated 24/7 social environment. Such mechanisms bring about fundamental changes in the students’ behavior, as seen in their active interfaith exchanges, counteraction to radical normative discourses, and social peace-building activities. The findings of the research emphasize that Islamic institutions such as the pesantren have the potential to bring about social change in society, as long as these institutions are approached with a holistic system and value-oriented character education for the students. This research articulates the development of a model approach to education for sustaining peace and preventing extremism, which is congruent with global frameworks and has practical relevance to the polity and institutions of Islamic education.