Background: The integration of Artificial Intelligence (AI) into education has revolutionized teaching and learning, particularly in health sciences. Physiotherapy education, which combines theoretical understanding and clinical skills, is increasingly leveraging AI tools to enhance knowledge retention, student engagement, and academic outcomes. However, the specific impact of these tools in physiotherapy remains underexplored. Objective: To assess the effect of AI-based learning tools on knowledge retention, student engagement, and learning outcomes in undergraduate physiotherapy education. Method: A cross-sectional study was conducted among 410 undergraduate physiotherapy students across multiple institutions. Participants who had experience using AI tools (e.g., ChatGPT, Quizizz, Socratic, Kahoot) completed a series of digital surveys: a pre-survey, the Student Engagement Scale, a Learning Outcomes Survey, and an AI Perception and Usability Survey. Descriptive statistics and Pearson’s correlation analysis were used to evaluate associations between AI tool usage and academic metrics. Result: Students reported higher engagement (M = 3.49), academic performance (M = 3.50), and knowledge retention (M = 3.53) with AI tools. Strong positive correlations were observed between AI tool usage and retention (r = 0.363), engagement (r = 0.285), and academic performance (r = 0.229). A negative correlation was found between reliance on traditional methods and AI usage (r = -0.217), indicating a preference shift toward AI-based learning. Conclusion: AI-based learning tools significantly contribute to improved academic engagement, knowledge retention, and educational outcomes in physiotherapy students. These tools demonstrate superiority over traditional teaching methods and should be considered essential components in modern physiotherapy curricula.