Despite growing interest in augmented reality (AR) for architectural education, a significant gap remains in understanding how AR combined with physics simulation can enhance the teaching of kinetic and reconfigurable design. This study addresses two research questions: (1) How can physics simulation facilitated in AR environments affect the learning of architectural discrete design? (2) What are the key pedagogical outcomes of physics-based simulation in AR-enhanced design studios compared to traditional approaches?. We employed a longitudinal artifact assessment methodology with 28 architecture master’s students across four implementation phases, progressing from traditional CAD tools to Physics Simulation Enhanced Geo-Referenced AR (PSE + Geo-AR). Three expert evaluators independently assessed student artifacts using a standardized rubric, with inter-rater reliability confirmed through Krippendorff’s alpha (average: 0.736). Results demonstrated significant progressive improvement in student performance across phases, with the largest gains occurring during the transition to physics simulation-enhanced AR. Students showed marked development in kinetic understanding and spatial reasoning—two key competencies for designing reconfigurable architecture. These findings suggest that integrating physics simulation with geo-referenced AR provides distinct pedagogical advantages over conventional AR approaches, offering educators a replicable framework for developing critical design skills in contemporary architectural practice.