Artificial Intelligence (AI) is becoming an integral part of the industrial world, medicine and education. Recent studies have shown a growing interest among educators in AI-powered educational tools and AI-driven assessments. AI-driven tools in education, in general, and in student assessment, in particular, propose many benefits in various areas, including: (a). offering personalized learning monitoring that addresses the student’s strengths as well as weaknesses and individual learning pace; (b). allowing test development targeting specific areas requiring improvement; (c). offering continuous evaluation to foster real-time and customized feedback for facilitating tailored intervention programs. In addition to providing a more comprehensive view of students’ progress, AI-powered assessment can help educators focus on more creative aspects of teaching to ensure that students receive consistent data-driven support that can capture the nuances of individual learning progress. However, besides these evident benefits, ethical considerations concerning overreliance on AI-driven solutions and data privacy pose crucial challenges. Nonetheless, despite these challenges and limitations, AI offers evident potential for enhancing teaching and learning experiences as well as leading to improved educational outcomes. This chapter explores future directions and key innovative approaches to AI-driven educational assessment.