The Metaverse represents an always-on 3D network of virtual spaces, designed to facilitate social interaction, learning, collaboration, and a wide range of activities. This emerging computing platform originates from the dynamic convergence of Extended Reality (XR), Artificial Intelligence of Things (AIoT), and platform-mediated everyday life experiences in smart cities. However, the research community faces a pressing challenge in addressing the limitations posed by the resource constraints associated with XR-enabled IoT applications within the Internet of City Things (IoCT). Additionally, there is a limited understanding of the synergies between XR and AIoT technologies in the Metaverse and their implications for IoT applications within this framework. Therefore, this study provides a detailed overview of the literature on the potential applications, opportunities, and challenges pertaining to the deployment of XR technologies in IoT applications within the broader framework of IoCT. The primary focus is on navigating the challenges pertaining to the IoT applications powered by VR and AR as key components of MR in the Metaverse. This study also explores the emerging computing paradigm of AIoT and its synergistic interplay with XR technologies in the Metaverse and in relation to future IoT applications in the realm of IoCT. This study’s contributions encompass a comprehensive literature overview of XR technologies in IoT and IoCT, providing a valuable resource for researchers and practitioners. It identifies challenges and resource constraints, identifying areas that require further investigation. It fosters interdisciplinary insights into XR, IoT, AIoT, smart cities, and IoCT, bridging the gap between them. Lastly, it offers innovation pathways for effective XR deployment in future IoT/AIoT applications within IoCT. These contributions collectively advance our understanding of synergistic opportunities and complementary strengths of cutting-edge technologies for advancing the emerging paradigms of urban development.