This study is aimed at describing (1) Pancasila-based character education in pesantren-based secondary schools, (2) the strategy employed by teachers in developing Pancasila-based character education, and (3) the obstacles faced by teachers in developing Pancasila-based character education. This research was descriptive in natureby employing qualitative approach. Research subjects were principals and teachers of Civic Education in several pesantren-based secondary schoolsin Yogyakarta Special Region. The data were collected through interviews, observation, and documentation. The collected data were analysed inductively.The results show that (1) the Pancasila-based character education is developed through the policy made by the principals and the teachers who developed the learning program, (2) the teacher's strategy in developing Pancasila-based character educationis conducted by integrating intra and extracurricular programs, and (3) the obstacles faced by teachers in developing Pancasila-based character education are related to the fact that not all teachers are able to integrate Islamic values developed in pesantrento the values embodied in Pancasila in teaching and learning process