Urbanization and technological growth are changing the landscapes of cities and impacting their economies, environment, and society. Smart cities, through advanced information and communication technologies, can address these challenges. This is where artificial intelligence (AI) has a major implication in optimizing governance, transportation, energy, public services, and many other systems. This paper investigates the introduction of artificial intelligence in the smart city development process with a considerable emphasis on governmental institutions and how AI solutions can improve the management of a city and life of its inhabitants. As a case study, Serbia’s smart city projects were thoroughly analyzed to demonstrate the prospects and problems of the application of artificial intelligence technologies in the public administration of cities and urban planning.