The rapid advancement of Information and Communication Technology (ICT) has created unprecedented opportunities for innovation in mathematics education, particularly through the integration of Augmented Reality (AR). This study presents a Systematic Literature Review (SLR) examining the role of AR as an ICT-based innovation in developing students' digital literacy and mathematical problem-solving ability. Following the PRISMA 2020 protocol, a comprehensive search was conducted across five databases—Scopus, Web of Science, ERIC, Google Scholar, and Garuda—yielding 127 initially identified articles. After applying rigorous inclusion and exclusion criteria, 25 peer-reviewed articles published between 2020 and 2025 were selected for in-depth analysis. The findings reveal that: (1) AR consistently improves students' mathematical problem-solving ability, with average score gains ranging from 18% to 34% relative to conventional instruction; (2) AR meaningfully supports the development of digital literacy by engaging students in multimodal, technology-mediated learning experiences; (3) the effectiveness of AR is substantially moderated by the quality of pedagogical design, with inquiry-based, problem-based, and gamification frameworks yielding the strongest outcomes; and (4) key implementation barriers include device accessibility, teacher digital competence, and instructional time constraints. Critically, this review identifies a salient gap in the literature: very few studies have integrated AR with local cultural contexts in Indonesian mathematics classrooms, pointing toward a promising direction for developing contextually grounded and culturally responsive learning models.