With the emergence of Artificial Intelligence (AI) chatbot technologies such as ChatGPT, which utilize AI and Machine Learning (ML) techniques to generate advanced responses to users, the field of education has been transformed drastically. The latest online learning models empowered by AI have proven to have several benefits for students, but these benefits also come with some inherent challenges, which impede students’ learning process and create hurdles for educators. The study aims to identify and analyze the benefits and drawbacks of AI chatbots in educational settings to help overcome existing educational barriers. The paper begins by highlighting the historical evolution of chatbots along with key elements that encompass the architecture of an AI chatbot. The paper also delves into the challenges and limitations associated with the integration of AI chatbots into learning platforms. A systematic literature review methodology has been adopted by dividing the research into several phases, using techniques of inclusion and exclusion criteria to identify appropriate scholarly articles for review. The research findings from this review reveal several benefits of leveraging AI chatbots in learning platforms. AI chatbots like ChatGPT can serve as a virtual tutoring assistant to foster an adaptive learning environment by aiding students with various learning activities, such as learning programming languages, foreign languages, understanding complex concepts, assisting with research activities and providing real-time feedback. Educators can leverage such chatbots to create course content, generate assessments, evaluate students’ performance and use it for data analysis and research. However, this technology possesses significant challenges concerning data security and privacy. In addition, ethical concerns impacting academic integrity and reliance on technology are some of the key concerns. Ultimately, AI chatbots can provide endless opportunities by creating a dynamic interactive learning environment, however, to allow students and teachers to maximize the potential of such a robust technology, it is imperative to first analyze and address the potential risks that AI chatbots pose.