This paper delves into the integration of artificial intelligence within Estonia’s education system, showcasing the country’s global reputation for digital innovation. Utilising the method of the case study and the method of document analysis, we explore not only the practical outcomes, challenges, and strategies related to the adoption of artificial intelligence in the Estonian education system but also its economic implications. The research highlights artificial intelligence’s potential to lead to cost efficiencies and economic benefits for the education sector. Furthermore, we address the critical issue of fostering artificial intelligence literacy among students, schools, and universities, pinpointing data privacy and ethical considerations as key areas of concern. The strategies implemented by educational institutions to mitigate these challenges and promote a comprehensive understanding of artificial intelligence are also discussed. In conclusion, the paper underscores artificial intelligence’s transformative potential in reshaping education, offering guidance for other nations and academic entities aiming to successfully integrate artificial intelligence-based technologies. Emphasis is placed on the importance of a supportive policy framework and a solid ethical foundation to navigate the complexities of artificial intelligence adoption and ensure responsible use, while also considering the economic impact on the educational ecosystem and the labour market at large.