This review thoroughly examines recent progress, challenges, and future prospects in the field of alkaline exchange membrane (AEM) electrolysis. This emerging technology holds promise for eco-friendly hydrogen production. It blends the benefits of traditional alkaline and proton-exchange membrane technologies, enhancing affordability and operational efficiencies by utilizing non-precious metal catalysts and operating at reduced temperatures. This study discusses key developments in materials, electrode design, and performance enhancement techniques. It also highlights the strategic role of AEM electrolysis in meeting global energy transition targets, like achieving Net Zero Emissions by 2050. An in-depth exploration of the operational fundamentals of AEM water electrolysis is provided, noting the technology’s early stage development and the ongoing need for research in membrane-electrode assembly assessment, catalyst efficiency, and electrochemical ammonia production. Moreover, this review compiles results on different cell components, electrolyte types, and experimental approaches, providing insights into operational parameters critical to optimizing AEM performance. The conclusion emphasizes the necessity for continuous research and commercialization efforts to exploit AEM electrolysis’s full potential across diverse industries.