This paper explores the potential of Large Language Models (LLMs) in automating the grading and feedback generation of short-answer responses in Arabic. Arabic poses unique challenges due to its linguistic complexity and the relative scarcity of well-developed Natural Language Processing (NLP) resources compared to languages such as English and Chinese. The study evaluates both proprietary models (GPT-4) and open-source models (Llama 3-8B, Llama 3-70B, and DeepSeek-V3) using the Environmental Science Corpus—a custom-designed dataset tailored for Arabic short-answer assessment. Two core tasks are addressed: grading and feedback generation. In the grading task, DeepSeek-V3 achieved the best performance, with a Quadratic Weighted Kappa (QWK) score of 0.8273, a Pearson correlation of 86.09%, and a Root Mean Squared Error (RMSE) of 0.76, indicating near-perfect agreement with human evaluators. GPT-4 ranked second, followed by Llama 3-70B, while Llama 3-8B was the lowest-performing model. In feedback generation, DeepSeek-V3 again led the performance with a human evaluation score of 79.61% for generating accurate and constructive feedback. GPT-4 ranked second, followed by Llama 3 models. Statistical analysis using the Wilcoxon test revealed significant performance differences among all models (p < 0.05), indicating that each LLM offers unique capabilities in handling Arabic short-answer grading. Overall, the results underscore the effectiveness of LLMs in Arabic educational assessment, highlighting the critical role of prompt engineering in enhancing model performance. The study demonstrates that LLMs can not only grade student responses with high accuracy but also generate meaningful feedback, thereby supporting the development of more effective automated learning tools. Practical recommendations and best practices are presented to help educators and developers optimize the use of LLMs in Arabic-language educational settings, laying the groundwork for future advancements in Arabic NLP.