This paper reviews the pivotal role of sensor technology in addressing the challenges of urbanization in Indian smart cities. The swift urbanization in India has given rise to various urban issues like traffic congestion, pollution, and insufficient infrastructure. Smart cities have emerged as a viable solution, leveraging technology and data-driven approaches to elevate quality of life, sustainability, and efficiency. Sensor technology plays a central role in this transformation, facilitating data collection, real-time decision-making, and efficient resource utilization. Indian smart cities deploy specialized sensors to address specific urban needs, ranging from monitoring air quality and traffic flow to optimizing waste collection and ensuring structural integrity. Initiatives such as the Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation, IoT-based projects, and public-private partnerships drive the integration of sensor technology, emphasizing citizen-centric strategies and innovative sensor applications. Case studies from cities like Chennai, Delhi, Bangalore, and Jaipur illustrate how sensor technology enhances urban services while preserving cultural heritage. The future of sensor technology in Indian smart cities holds potential through AI integration, edge computing, 5G connectivity, and alignment with Sustainable Development Goals, promising to address urban challenges and enhance residents’ quality of life.