This research goal is to discribe, 1) Character setting of learning which is based on Teaching Factory in SMK Muhammadiyah 1 Klaten, 2) Feature of teacher learning activity which is based on Teaching Factory in SMK Muhammadiyah 1 Klaten, 3) Feature of students learning activity which is based on Teaching Factory in SMK Muhammadiyah 1 Klaten. This kind of research is qualitative and using ethnography design. This reseach was done in SMK Muhammadiyah 1 Klaten. The main subject in this research is school manager of SMK Muhammadiyah 1 Klaten. Information keys are head master, teachers, and students. File collecting methods used were interview, observation, and documentation. File analysis is using intersites analysis, arranged file analysis, and unarranged analysis. Validiting file test is using credibility, transferability, confirmability, and dependability. Result of this research is: 1) Management of education in SMK Muhammadiyah 1 Klaten is increasing service to stakeholders by applying learning which is based on Teaching Factory, although we have to observe the administration prequirement of teachers' education because of the decreasing number of teachers who have master title, 2) The SMK Muhammadiyah 1 Klaten teachers have been through learning process which is based on Teaching Factory while considering some matters, those are building of teachers' character strongly, learning planning by work sheet, and doing learning which is based on industry and customers' needs, 3) In doing learning process, which is based on Teaching Factory, the students are ready before to have skill and good character, as well as give them some competencies so they will be ready to work or become a businessman after their graduation.