This study explores the dynamics of ChatGPT on perceptions and challenges encountered by students and lecturers in a South African open distance e-learning [ODeL] university. It investigates whether ChatGPT disrupts traditional perceptions of online distance education held by students and lecturers and identifies specific functions and features of ChatGPT that address challenges in ODeL. This article addresses a literature gap by examining the impact of AI chatbots on perceptions and challenges in online distance education. Drawing upon the community of inquiry theory, the research examines the transformative effects of ChatGPT on teaching, learning, and communication dynamics in a large enrolment module of 16,000 students. This qualitative phenomenological research design study involves evaluations, focus group discussions with first-year students, and one-on-one interviews with lecturers. Data was collected in the first semester of 2023. Participants were purposively sampled. Findings revealed that students found ChatGPT more engaging and interactive, feeling more connected to peers and lecturers. However, lecturers expressed negative attitudes towards ChatGPT. Specific functions and features of ChatGPT identified include personalised feedback and support, natural language processing for communication and comprehension, and instant access to information and resources. The study contributes to understanding the role of AI chatbots in enhancing online learning experiences and addressing challenges in ODeL.