Art placement within interior environments is more than aesthetic embellishment; it exerts measurable effects on emotion, cognition, and spatial experience. This paper examines the dual role of art in contemporary interiors: as an affective stimulus that shapes mood, perception, and wellbeing, and as a functional design element embedded within acoustic systems, partitions, lighting, and furniture. Drawing on environmental psychology, neuroaesthetics, and design theory, the study synthesises evidence on how scale, imagery, and spatial positioning influence stress reduction, attention restoration, identity formation, and social behaviour. Case analyses from healthcare, public cultural districts, and commercial settings illustrate how strategic art integration improves wayfinding, reduces anxiety, and strengthens place identity. The paper also outlines emerging functional typologies, including acoustic art panels and object-art furniture, demonstrating how artistic interventions enhance both performance and ambience. By framing art as a deliberate, evidence-informed component of interior design, the study offers a multidisciplinary foundation for advancing wellbeing-oriented and functionally responsive spatial practices.