Engineering education providers should foresee the potential of digital transformation of teaching and skill-developing activities so that graduating engineers can find themselves highly aligned with the demands and attributes needed by prospective industrial employers. The advancement of industrial revolutions towards hybridisation of the enabling technologies recognised by Industry 4.0, Society 5.0, and Industry 5.0 have transformed the components of the engineering higher education system remarkably. Future workforce requirements will demand an employee’s multidisciplinary skill mix and other professional qualities. Implementing human-centric decision-making based on insights from the Digital Twin (DT) systems, sustainability, and lean systems is necessary for further economic growth. Recent barriers identified by the Australian Council of Engineering Deans, the development of teaching capabilities, and affordable and digitally transformed learning facilities by education providers were all considered. This paper explores the role of Digital Twins (DTs) in enhancing engineering higher education by incorporating Industry 4.0 components and other industrial advances. By reviewing curricula, pedagogy, and the evolving skill requirements for engineering graduates, this study identifies key benefits of DTs, such as cost-effectiveness, resource management, and immersive learning experiences. This paper also outlines challenges in implementing DT-based labs, including IT infrastructure, data quality, privacy, and security issues. The findings indicate that engineering education should embrace DTs to foster multidisciplinary skills and human-centric decision-making to meet future workforce demands. Collaboration with industry is highlighted as a crucial factor in the successful transformation of teaching practices and in offering real-world experiences. The COVID-19 pandemic has expedited the adoption of DT technologies, demonstrating their utility in minimising educational disruptions. While this paper acknowledges the high potential of DTs to prepare engineering students for future industry demands, it also emphasises the need for professional development among educators to ensure effective and balanced implementation.