Architecture and Urban design fields are experiencing a paradigm shift in the design processes and practice due to the new technological development of integration of Artificial Intelligence (AI). Conventional architectural practices are being completely transformed by the amalgamation of the capabilities of AI. This transition is happening exponentially due to technological innovations and the potential of AI-driven tools to optimize almost every aspect of architectural practice. The software and tools integrated with AI-powered algorithms are assisting architects to generate innovative designs and predict the performance of architectural systems. This research examines current trends and applications of AI in the architecture and urban planning domains by performing a literature review of 112 research papers, articles, websites, and technology blogs, to explore the significant impact of AI, associated challenges, and future prospects. We have mentioned notable AI-integrated projects worldwide, commonly used software tools, and key contributors in this field and discussed the challenges of AI integration within the Architecture, Engineering, and Construction (AEC) industry. We traced newly emerging AI-infused technologies like generative design algorithms, digital twins, and sustainability analysis tools. This research outlines potential future progressions of AI in architecture, underlines new avenues for innovation, and the changing role of architects due to the integration of AI.