Islamic education has been playing a significant role in the creation of peaceful, disciplined, and hardworking citizens and it also improves the literacy rate of the country. However, scholarly works studied so far ignore the real legacy of Islamic education in Ethiopia. A multitude of research has been done on whether Islamic education is practiced and contributes in multiple disciplines. However, it is hard to find research that entirely focuses on the practices, challenges, and contributions of Islamic education, especially in the Ethiopian; Gondar context. Therefore, the overarching purpose of this research is to explore the practices, challenges, and contributions of Islamic education: Gondar Grand Mosque; Abubeker Sediq Islamic education center. Qualitative approach and case study design were employed to guide this research. The data were collected from Ustazs and Deressas (using purposive sampling technique), former Deressas (purposively using snowball sampling technique), and the Ulema and Mejlise leader (using comprehensive sampling comprehensive technique) by interview, observation in the field, and through document review. The data obtained from interviews, observation, and document review were analyzed following the analysis procedures of organizing, transcribing, coding, developing themes, subthemes, and finally presenting reports. The finding of this research reveals that all levels of Islamic education (Quran, Fiqih, Hadith, and Quran Tafsir) were practiced. Only Ustazs selected and planned the learning contents, but they respect the needs of the Deressas. The teaching methods employed in the Abubeker Sediq Islamic education center were Lecturing, roleplaying, game, field visit, energizer and question, and answering, both Ustaz/teacher-centered and Deressas/students centered teaching-learning approach were employed. Textbooks and some reference materials were instructional materials found in the Abubeker Sediq Islamic education center. The Ustaz first identifies Deressas background before accepting as Deressas of the Abubeker Sediq Islamic education center. Based on the identification, they arrange different classroom sessions like, morning, afternoon, non-regular, multi-grade, and session for talented or gifted Deressas and supportive mechanisms based on the identified behaviors and needs. The Abubeker Sediq Islamic education center had a flexible schedule (Pre-morning and morning, after-noon, session for non-regular, multi-grade and session for talented Deressas) due to this, the Deressas can learn at any time when they need; and it focused on “mastery of learning” rather than counting the academic calendar. The Abubeker Sediq Islamic education center had its management bodies that managed the overall activities of the Abubeker Sediq Islamic education center, due to these disciplinary problems were not the major issue in the institution. The purpose of the assessment in the Abubeker Sediq Islamic education center was to know Deressas progress in and after graduation. Lack of trained manpower, lack of resources, lack of stakeholder’s involvement, and challenges related to administration of the institution were the challenges encountered in practice. The findings also indicated that Islamic education has contributions to the religion, literacy, social responsibility, smooth economic and social practices, and creation of ethical and logical citizens in all aspects. The findings also indicates that there are practices of Islamic education that may be lessons to better management, to modern education, to create disciplined societies, economic stability etc.