Smart cities continue to be discussed throughout Europe as a result of the continent's rising urbanization and the need for sustainable development. Artificial intelligence (AI) has the potential to significantly promote this shift by assisting cities in becoming more effective, sustainable, and receptive to the requirements of their residents. This study examines the potential and difficulties of AI in urban development and presents a framework for incorporating AI into city planning and management. This study evaluates the advantages of AI in fostering public involvement, reducing costs, and enhancing city services, as well as the potential challenges related to data privacy, ethics, and socioeconomic imbalance. It does this by using examples from European cities. This study presents a set of ethical and inclusive AI criteria, such as transparency, inclusion, and accountability, to enable responsible AI research and implementation. It continues by emphasizing the need for efficient AI integration in smart cities and pushing for a holistic AI-enabled transition to inclusive and sustainable smart cities.