This study aims to analyze changes in students’ moral character and the mechanisms through which small-group discussions influence students in the Islamic Character Development (BPI) program at SMPIT Daarussalaam Sangatta Utara. Using a qualitative case study approach, data were collected through observation, interviews, and documentation, which were then analyzed thematically. The results indicate that the small-group discussion-based BPI program is effective in enhancing students’ politeness, discipline, responsibility, emotional control, social concern, and religious awareness. This effectiveness arises through processes of self-reflection, social learning from peers, the internalization of values through dialogue, the exemplary role of facilitators, and the reinforcement of positive behaviors supported by continuous monitoring. Furthermore, the integration of the program with school policies and parental involvement further strengthens the development of students’ character in a more profound and sustainable manner.