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The growing demand for high-fidelity, multi-parameter, distributed sensing in critical domains such as structural health monitoring, oil and gas exploration, and secure perimeter surveillance is pushing traditional optical fiber sensors (OFS) to their performance limits. Although conventional multiplexing techniques such as time-division and wavelength-division multiplexing (TDM, WDM) have been commercially successful, they are rapidly approaching fundamental bottlenecks in sensor density, spatial resolution, and data capacity. This review argues that the synergistic convergence of space-division multiplexing (SDM) and artificial intelligence (AI) represents a paradigm shift, enabling a new generation of intelligent, high-dimensional sensing networks. We comprehensively survey the state of the art in SDM-based OFS, detailing the operating principles and applications of multi-core fibers (MCFs) for ultra-dense sensor arrays and 3D shape sensing, as well as few-mode fibers (FMFs) for mode-division multiplexing and enhanced multi-parameter discrimination. However, the unprecedented spatial parallelism provided by SDM introduces significant challenges, including inter-channel crosstalk, complex signal demultiplexing, and massive data volumes. This paper systematically explores how AI, particularly machine learning (ML) and deep learning (DL), is being leveraged not merely as a tool but as an indispensable core technology to mitigate these impairments. We critically analyze AI’s role in digital crosstalk suppression, intelligent mode demultiplexing, signal denoising, and solving complex inverse problems for parameter estimation. Furthermore, we highlight how this AI–SDM synergy enables capabilities beyond the reach of either technology alone, such as super-resolution sensing and predictive analytics. The discussion is extended to include the critical supporting pillars of this ecosystem, such as advanced interrogation techniques and the associated data management challenges. Finally, we provide a forward-looking perspective on the trajectory of the field, outlining a path toward cognitive sensing networks that are self-calibrating, adaptive, and capable of autonomous decision-making. This review is intended to serve as a foundational reference for researchers and engineers at the intersection of photonics and intelligent systems, illuminating the pathway toward tomorrow’s intelligent sensing infrastructure.