The education system in Indonesia has two main sub-systems, one under the management of the Ministry of Education and Culture (MoEC), and madrasah education and religious education under the management of the Ministry of Religious Affairs (MoRA). Out of approximately 233,517 state schools and madrasah, about 82% are state schools and the remaining 18% are madrasah; and out of 49,402,000 students from these institutions, 87% are registered in-state schools and other 13% are registered in madrasah. Indonesian laws and regulations require state schools and madrasah to be treated equally. Moreover, madrasah teaches the same national curriculum in addition to Islamic religious subjects regulated by MoRA. The author tried to define the current circumstance of Islamic education in Indonesia, the academic issues that the government faces and sought possible solutions for them through field surveys and data analysis methods used throughout the investigation. The found data show that improper infrastructure of government contribution towards public education including religious education, and limited quota in pedagogical universities lead to a shortage of teachers in rural areas. The government of Indonesia needs further educational reforms in the area of public education, teacher training, and re-training programs, and increasing teachers' salaries. School dropouts, shortage of well-qualified teachers, and school fees challenge the national education system in the country.