The research examines the transformative impact of artificial intelligence (AI) on human identity, focusing on the interplay between technological innovations, institutional structures, and social dynamics. Integrating AI into everyday life has radically altered the processes of self-discovery, the nature of interpersonal interaction, and the foundations of collective identity. Employing an interdisciplinary approach rooted in institutional economics, the research traces the historical evolution of human identity, exploring how technological advancements (from antiquity to the digital age) have shaped our understanding of what it means to be human. Particular attention is given to the contemporary phenomenon of “AI-governed identities,” where algorithmic systems and digital platforms serve as primary mediators in defining self-perception and social interaction. The research also highlights ethical issues associated with the use of AI, including the erosion of individual autonomy, the threats posed by technological homogenization, and the potential for the preservation or exacerbation of social inequality driven by algorithmic bias. In this context, the author emphasized the need for adaptive institutional mechanisms that can balance technological progress with cultural inclusivity and equitable development. To address these challenges, the research proposes a coevolutionary framework that integrates technology and institutional mechanisms, offering practical strategies to minimize risks and sustain identity in the AI era. This research significantly contributes to the discussion of the ethical and social implications of AI, providing valuable recommendations for policymakers and scholars interested in exploring the complexities of identity transformation in the digital age.