This study explores the integration of Generative Artificial Intelligence tools, such as ChatGPT, in higher education at the University of Applied Sciences Dresden. Through a standardized online survey targeting both lecturers and students, this research investigates usage patterns, perceived benefits, challenges faced by educators in implementing AI tools effectively within pedagogical contexts. The research employs contingency theory as a framework to analyze how context affects the effectiveness of generative AI usage in teaching practices. The sample consisted of responses from both 51 lecturers and 28 students, with qualitative data analyzed through thematic content analysis. As these technologies reshape teaching and learning dynamics, this study highlights a growing divide in how instructors and students utilize these technologies. In contrast, many students have quickly integrated AI into their academic routines, but instructor adoption remains limited and fragmented. Findings reveal that while approximately two-thirds of instructors engage with generative AI primarily for course preparation tasks, such as creating teaching materials, their overall application remains limited due to barriers like legal uncertainties and insufficient institutional guidelines, ultimately hindering broader application. In contrast, students demonstrate frequent use but express concerns regarding ethical implications surrounding AI’s role in academic work. The results underscore the need for tailored support structures that address individual needs while promoting responsible use amidst ongoing digital transformation in education.