Recent developments in modern artificial intelligence (AI) have driven profound changes in public sector human resource management systems, offering remarkable opportunities alongside intricate challenges. Governments across the globe are progressively integrating AI tools to modernize HR operations, enhance workforce planning, and respond to evolving socio-economic demands. This research utilizes the PRISMA framework for systematic literature review to explore the role of AI in transforming government HR practices. By analyzing 47 peer-reviewed articles published from 2019 to 2023, the study identifies five central themes: ethical and governance models for AI in public administration; AI’s influence on HR functions and organizational behavior; implementation barriers and potential benefits; AI applications in digital governance and policy formulation; and innovations in HR technologies driven by big data. The findings highlight critical success factors such as strong data infrastructure, structured employee training initiatives, and well-defined ethical standards. Key challenges identified include concerns around data privacy, biased algorithms, workforce adaptation, and wider societal implications like employment shifts and changing competency needs. The study underscores the importance of: (1) adaptive regulatory frameworks that support innovation while safeguarding public interest; (2) robust data governance strategies to manage confidentiality and cybersecurity risks; (3) tailored training programs aimed at improving AI understanding among government staff; and (4) collaborative efforts across sectors to promote ethical AI adoption and mitigate socio-economic disruptions.