This paper intends to describe and analyse the process of education reform that has taken place in Malaysia. Islamisation plays a major role in such reform. The approach is innovative and novel in nature. Historically, Malaysia was under the British colony and the British left a strong impact in the education system. Naturally the position of Islam was not in the priority list. The post-Independent era witnessed a strong demand by the Muslims that Islam should be embedded firmly in the Malaysian education system. This paper also analyse some of the foundational issues relevant to the reform. The concept and methodology of this reform was finally translated in the form of learning institutions. It seeks to harmonise between the western and the Islamic traditions of knowledge. The success is far reaching and has a strong impact on human capital as well as knowledge society developments.