Prompt engineering plays a critical role in code generation by creating effective AI-assisted solutions for developers. It involves designing precise and relevant prompts to guide AI models, such as GPT, in generating accurate and contextually appropriate code snippets. This approach not only speeds up coding tasks but also reduces human error, providing developers with a powerful tool to enhance productivity. With advancements in AI and natural language processing, prompt engineering enables developers to automate repetitive tasks, generate code suggestions, and even solve complex problems, making development more efficient and collaborative in modern software engineering.