Abstract
This research will examine the recent developments in conservative Islamic educational institutions in Indonesia and Malaysia. The issues of terrorism and mainstreaming religious moderation influence the dynamics of conservative Islamic educational institutions. This dynamic focuses on two things: the formation and shift of Islamic educational institutions after the issue of terrorism and the policy of religious moderation. This research was conducted at several conservative Islamic educational institutions in Indonesia and Malaysia. This research uses a phenomenological qualitative approach with data collection techniques through observation and in-depth interviews to understand the meaning and experiences of the informants in the field. Research findings indicate that the recent development of Islamic educational institutions managed by conservative Islamic groups such as the Salafis has become more inclusive, tolerant, and moderate following the issues of terrorism and religious moderation. This is due to the counter-terrorism and religious moderation programs implemented over the past two decades. This formation of inclusive understanding then encourages a shift in understanding and practice of diversity toward being more tolerant and inclusive.