Preheat the air fryer to 400°F (200°C) for 5 minutes.
Pound the chicken breasts to an even thickness of about 1/2 inch using a meat mallet or rolling pin.
In a shallow bowl, combine the all-purpose flour, salt, black pepper, garlic powder, and smoked paprika.
In a separate shallow bowl, whisk together the egg and water until fully combined.
In a third shallow bowl, mix the panko breadcrumbs and grated Parmesan cheese.
Dredge each chicken breast first in the flour mixture, shaking off any excess.
Dip the chicken into the egg mixture, ensuring it is fully coated.
Press the chicken into the panko and Parmesan mixture, coating both sides evenly. Gently press to adhere the coating.
Spray both sides of the coated chicken breasts lightly with cooking spray.
Place the chicken breasts in the air fryer basket in a single layer without overlapping.
Cook at 400°F (200°C) for 7 minutes, then flip the chicken breasts and cook for an additional 7 to 8 minutes, or until the internal temperature reaches 165°F (74°C) and the coating is golden and crispy.
Remove the chicken breasts from the air fryer and let rest for 3 minutes before serving.