Service learning can enhance prospective teachers' instructional practice through designing English lessons and tasks for real purposes based on the local context. This study analysed 31 Taiwanese EFL undergraduates' lesson designs and implementations of contextualized language instruction as service learning in a language teacher education programme in Taiwan. Based on the thematic analysis of lesson plans, self-evaluations, peer-evaluations, stakeholders' feedback, teaching videos, and interviews, this study reached the following major findings. First, through the investigation of the textbooks and local features, undergraduates designed topic-based lessons with contextualized dialogues as the features of contextualized language instruction. Secondly, the TESOL method course, instructor's modelling, and collaborative lesson planning purposefully prepared 31 English majors for the lesson designs and implementation as service learning. Thirdly, the undergraduates' knowledge was constructed, particularly knowledge of learners, teaching contexts, educational ends as well as content and curriculum knowledge of contextualized language instruction. Finally, participants, their peers, and stakeholders (learners and tourists) regarded these lessons relevant to their lives. Suggestions on effective integration of lesson designs and implementations of contextualized language instruction into service learning for prospective language teachers were provided.