In the era of smart living, optimizing sfocus for enhancing both functionality and aesthetics in interior environments. This paper explores the transformative potential of Artificial Intelligence (AI) in the realm of soft furnishings and decor, offering innovative solutions for space optimization. By leveraging advanced AI algorithms, we propose methodologies for creating dynamic and adaptable interior layouts that maximize the utility of available space while maintaining visual appeal. Our research encompasses the integration of machine learning techniques for predictive design, enabling the creation of personalized and responsive living spaces. We delve into AI-driven tools for selecting and arranging furniture, textiles, and decorative elements, emphasizing the importance of ergonomics and user preferences. Case studies demonstrate the practical application of these intelligent systems in diverse residential and commercial settings, highlighting significant improvements in space utilization and occupant satisfaction. Through this comprehensive analysis, we aim to bridge the gap between traditional design practices and cutting-edge AI technologies, paving the way for a new paradigm in interior design. Our findings underscore the potential of AI to revolutionize the design industry, offering scalable and sustainable solutions for modern living spaces.