This systematic literature review explored the impact of integrating AI tools in higher education using the Zone of Proximal Development (ZPD) by Lev Vygotsky. It examined how AI tools assist the students in identifying and operating within their ZPD, how to create and facilitate a collaborative learning environment, and how to provide the necessary scaffolding for effective learning. The sample included 158 empirical studies which were retrieved from Web of Science, Scopus, and ERIC, published between 2021 and 2024. Findings indicated that AI tools assist learners in personalising their self-assessment through social and technological interactions, and effective communication; they improve motivation, learning engagement, and learning support, which leads to better academic performance, student maturation, and development. Additionally, AI tools were found suitable for creating collaborative learning environments, empowering learners, and facilitating meaningful interactions. Furthermore, results emphasise the need for educator's professional development, ethical AI deployment, and the integration of AI into designing meaningful learning experiences. These results indicate that there should be equitable access to training and effective resolutions for ethical challenges that may undermine the integrity of the learning process. The study highlights strategic AI integration to significantly enhance learning outcomes and student engagement, focusing on academic integrity and complementing traditional educational methods. Recommendations are that there is a need for longitudinal studies to assess the long-term impact of AI on learning outcomes, student engagement, and the development of critical thinking and problem-solving skills.