The integration of artificial intelligence (AI) in psychiatric education offers transformative potential to enhance clinical competence through realistic simulations. Traditional educational methods face limitations in replicating complex psychiatric cases, and AI-based tools provide a scalable solution. This narrative review examines current evidence on the efficacy of AI-powered simulations, focusing on their role in skill development, diagnostic accuracy, and safe clinical training. Through a comprehensive literature review of studies from 2010 to 2024, key themes such as AI's ability to standardize patient encounters, provide instant feedback, and improve student confidence are explored. Findings suggest that AI can enhance psychiatric education by offering consistent, adaptable learning experiences that prepare trainees for real-world complexities. However, challenges such as ethical considerations and accessibility disparities must be addressed for AI to be effectively integrated into psychiatric training. This review provides insights into the future of AI in medical education and its potential impact on training the next generation of psychiatrists.