This study investigates the relationship between the dynamic capabilities of university administration and students’ awareness of artificial intelligence (AI) tools within a higher education context. Drawing on data from 139 students at the College of Education, Sultan Qaboos University, the research employed two validated instruments, one measuring the dynamic capabilities of university administration and another assessing students’ awareness and perception of AI tool use. Understanding this relationship is critical, as universities increasingly face pressure to guide responsible and effective AI use among students. Findings reveal significant correlations between the university administration’s dynamic capabilities, particularly technological agility, and students’ engagement with AI tools. Notably, technological dynamic capabilities within the administration significantly predicted two specific dimensions of student awareness: effectiveness of using AI tools and perceived faculty members’ efficiency in AI. These results highlight the critical role of institutional leadership in promoting equitable and sustainable integration of AI in education. The study contributes to the broader discourse on AI for sustainable development by illustrating how institutional strategies can enhance innovation, inclusion, and student readiness in support of SDG 4.