Aim: The study aims to assess the magnitude of internet addiction and its associating risk factors among young medical students, focusing on its impact on academic performance and psychological well-being. Materials and Methods: A cross-sectional study was conducted among 100 undergraduate medical students aged 18–25 years. Participants were selected using a simple random sampling method. Data were collected through a structured, self-administered questionnaire comprising demographic details, Young’s Internet Addiction Test (IAT), and assessments of risk factors such as academic performance, sleep disturbances, anxiety, depression, and social withdrawal. Results: The mean age of the participants was 21.3 ± 2.1 years, with 58.0% males and 42.0% females. Internet addiction assessment using IAT classified 20.0% of students as normal users, 35.0% with mild addiction, 30.0% with moderate addiction, and 15.0% as severely addicted. Daily internet usage showed that 40.0% used the internet for 2–4 hours, while 15.0% spent more than 6 hours online. Academic performance was negatively affected as addiction severity increased, with only 20.0% of severely addicted students performing well academically. Psychological factors, including sleep disturbances (40.0%), anxiety (28.0%), depression (26.0%), and social withdrawal (20.0%), were significantly associated with severe addiction. Correlation analysis confirmed a moderate to strong association between internet addiction and mental health concerns, with anxiety showing the highest correlation (r = 0.50, p < 0.01). Conclusion: The study highlights a high prevalence of internet addiction among medical students, with adverse effects on academic performance and psychological well-being. The findings emphasize the need for structured interventions such as time management strategies and mental health programs to mitigate the negative consequences of excessive internet use.