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In technology-based learning environments, the potential impact of Generative AI on students’ Proactive Skill Development (PSD) is critical but paradoxical. To explain this, we test a key psychological variable: AI Locus of Control (AI-LoC), which measures students’ perceived agency when using the AI technology. Employing Structural Equation Modeling (SEM) with 489 university students, our results support a suppression model. The model reveals a non-significant total effect of AI use frequency on PSD, which conceals two opposing pathways: a positive direct effect and a significant negative indirect effect mediated by AI-LoC. This finding isolates a crucial mechanism that determines how AI-based environments impact skill development outcomes and offers a new theoretical lens and empirical evidence for future research.