This paper starts with a brief definition of traditionalist Islam in Indonesia and how scholars have addressed it. It then discusses how Indonesian Islamic education institutions, including pesantren, have responded to modernisation and secularisation imposed by the state and public demand. The case of Pesantren Sidogiri is presented as a case study to show how a traditional pesantren can cope with modernisation in a different way to most other pesantren. It is then followed by an analysis of the extent to which the success of the Pesantren Sidogiri's economic projects affects its popularity among the Muslim public.