<p>The purpose of this study was to investigate the effect of guided discovery with a contextual problem-solving approach on students’ conceptual understanding of algebra. A concurrent embedded quasi-experimental design with a nonequivalent control group pretest–posttest design was employed. A total of 205 ninth-grade students participated in the study. The data were collected using a conceptual understanding test, interviews, and observations. Quantitative data were analyzed using descriptive statistics and ANOVA, while qualitative data were analyzed thematically. The study found a significant improvement in overall, contextual, and non-contextual-type conceptual understanding for students in the treatment groups compared to those in the comparison group. Moreover, it has been observed that integrating guided discovery with the contextual problem-solving instructional approach was more effective than the contextual problem-solving, the guided discovery, or the conventional instructional approach. The contextual problem-solving instructional approach also outperformed both the guided discovery and conventional instructional approaches in developing contextual-type conceptual understanding. Moreover, the guided discovery instructional approach was more effective than the conventional instructional approach for non-contextual-type conceptual understanding.</p>