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This qualitative study examines how AI-facilitated Socratic questioning shapes students’ critical thinking development, ethical awareness, and intellectual engagement. Using thematic analysis of AI-student dialogues, reflective journals, and interviews, the research explores how learners interact with AI as a dialogic partner. Findings reveal that AI prompts metacognitive reflection, highlights algorithmic bias, and fosters intellectual humility—while also surfacing risks such as over-reliance. This study contributes to reimagining assessment in AI-mediated environments, emphasizing that thoughtfully integrated AI can serve as a catalyst—not a crutch—for cultivating ethical and reasoned discourse in higher education.