Although religious diversity is legally supported in Indonesia, incidents of attacks on religious minorities and anxiety towards the practice of religious pluralism have continued to plague the country. This paper will analyse factors limiting the practice of religious diversity in post-Suharto Indonesia with a focus on two types of important grass-roots religious institutions. The first type is religious philanthropic organizations, which provide social services for natural disaster victims and the poor. The second type of religious institution is traditional Islamic schools known as pesantren salaf, one of most the important educational institutions for Islamic scholars. This paper will show that increased religiosity has contributed to the growth of socially-engaged religious organizations being used to address social problems, but these religious institutions are naturally developing their operational links within their own religious affiliations and communication beyond their religion is restricted because of mutual anxiety. This paper will also examine the challenge presented by traditional Islamic educational institutions. In order to protect Islam from secularism, these institutions are promoting theologically conservative Islamic teachings that curtail the practice of religious diversity at the grassroots level. Our case studies show that religious education has unintentionally limited the development of religious diversity in Indonesia. © Copyright 2014 by Koninklijke Brill NV, Leiden, The Netherlands.