Phobia is a major mental health issue, faced by people and affects their everyday functioning and general well-being. In the traditional method, for treating Phobia Conventional therapeutic approaches, like cognitive-behavioural therapies and exposure therapy, are frequently used by the patients because of their acceptability, adherence, and accessibility. In this research, there is a possibility of using immersive technology for treatment like Augmented Reality (AR) technology for creating the immersive, interactive kind of therapy for exposure method and desensitization, and it gives the best alternative to traditional phobia treatment methods. This paper elaborates on the extensive use of AR in Phobia treatment so far and the further research in AR-based phobia therapy research, by giving a detailed review of the essential discoveries, useful implications, and future possibilities. In this study, we examine a thorough foundation for AR therapy, practical implementation, future considerations in clinical settings, and example case studies by giving the demonstration of effective interventions through AR Therapy. At the end of the paper, a limitation, as well as a future gap, is discussed with the help of incorporating immersive cutting-edge AR technology in the therapeutic of phobia treatment along with artificial intelligence and machine learning.