The rapid advancement of digital technology particularly Augmented Reality (AR) and Virtual Reality (VR) is driving major innovation in Islamic Religious Education (IRE), especially within Indonesian madrasahs. This study aims to provide the first comprehensive synthesis of international and national literature (2015–2024) on the integration of AR/VR in IRE within the Indonesian madrasa context, with a focus on both the transformative potential and the practical challenges of implementation. Adopting a narrative review approach, this research systematically analyzes empirical studies, theoretical papers, and policy documents retrieved from reputable scientific databases. Data were collected through structured literature searches and selected using inclusion criteria emphasizing relevance, methodological rigor, and recency. Thematic analysis was then employed to identify key patterns related to learning innovation, infrastructural readiness, pedagogical adaptation, and regulatory frameworks. The results demonstrate that AR/VR can significantly enrich religious learning by fostering interactive experiences, increasing student engagement with Islamic concepts, and broadening access to authentic, context-rich educational resources. However, the adoption of these technologies in Indonesian madrasahs remains hindered by inadequate infrastructure, gaps in digital literacy among teachers and students, curriculum alignment issues, and context-specific ethical concerns. The findings reveal a persistent divide between global technological advancements and the realities of local implementation. This review underscores the need for the development of contextualized pedagogical frameworks, comprehensive teacher training, and robust policy support to facilitate equitable and meaningful AR/VR integration. By offering critical analysis and strategic recommendations, this study advances academic discourse and provides actionable guidance for policymakers, educators, and technology developers in realizing transformative, value-based Islamic education through immersive technologies.