The connection between service and character is a natural fit in today's schools. An important fact of school reform in recent years has been the push to connect academics to the "real world." But while there is widespread agreement that educating students to become good citizens is crucial, there are differences on how to make that goal a reality. Many educators, however, are finding that the service-learning and character development approaches go hand in hand. Following an overview, this issue paper first defines and describes character education and service-learning. The paper focuses on how service and character support each other. It discusses conflicting opinions about policy options and policy challenges. It outlines guidelines and strategies for state policymakers who wish to draft legislation about character education and service-learning. (Contains 15 references and 9 resources.) (BT)