The integration of generative AI tools like ChatGPT, Gemini, and DALL-E is reshaping education by offering personalized and interactive learning experiences, enhancing accessibility and engagement. Despite the enthusiasm surrounding AI in education, research on its tangible impact on learning outcomes remains limited. This study addresses this gap by examining how these AI tools affect knowledge retention, engagement, and critical thinking among university students. Utilizing a mixed-methods approach, combining quantitative assessments and qualitative interviews, the study provides a comprehensive analysis of AI's educational impact. Pre- and post-intervention tests revealed substantial improvements: knowledge retention increased by 24.6%, engagement by 24.2%, and critical thinking by 31.9% in students using AI tools. A notable positive correlation was found between frequent AI tool usage and heightened engagement levels. Student feedback reflected an overwhelmingly positive perception of AI tools, with many reporting improved understanding and engagement, though concerns about potential over-reliance on AI also emerged. Additionally, demographic factors, such as age and familiarity with technology, influenced AI‘s impact on learning outcomes. These findings highlight AI's potential to enrich educational experiences but also stress the need for ethical guidelines to address dependency risks. This study offers valuable insights for educators and policymakers on effectively integrating AI into educational settings, emphasizing the importance of further research on long-term effects and ethical frameworks for responsible AI use in education.