The rapid advancement of Artificial Intelligence (AI) has transformed customer service practices across service-based businesses. AI chatbots, powered by technologies such as Natural Language Processing (NLP) and machine learning, enable organizations to provide instant, automated, and personalized responses to customer queries. This study examines the role of AI chatbots in enhancing customer satisfaction within service-oriented industries. The research explores how chatbot functionalities, including 24/7 availability, quick response time, and consistent service delivery, contribute to improving the overall customer experience. By reducing response delays and handling high volumes of customer interactions efficiently, AI chatbots help businesses maintain service quality while lowering operational costs. The study also analyzes customer perceptions regarding chatbot effectiveness, usability, and reliability in addressing service-related concerns. Although AI chatbots offer numerous benefits, challenges such as limited emotional intelligence and difficulties in handling complex queries remain important considerations. The findings suggest that the integration of AI chatbots with human support systems can significantly improve service efficiency and customer satisfaction. Therefore, service-based organizations are encouraged to adopt AI-driven chatbot technologies as a strategic tool to strengthen customer engagement and enhance service quality in an increasingly digital business environment.