The existing grid infrastructure has already begun transforming into the next-generation cyber-physical smart grid (SG) system. This transformation has improved the grid’s reliability and efficiency but has exposed severe vulnerabilities due to growing cyberattacks and threats. For example, malicious actors may be able to tamper with system readings, parameters, and energy prices and penetrate to get direct access to the data. Several works exist to handle the aforementioned issues, but they have not been fully explored. Consequently, this paper proposes an AI-ADP scheme for the SG system, which is an artificial intelligence (AI)-based attack-detection and prevention (ADP) mechanism by using a cryptography-driven recommender system to ensure data security and integrity. The proposed AI-ADP scheme is divided into two phases: (i) attack detection and (ii) attack prevention. We employed the extreme gradient-boosting (XGBoost) mechanism for attack detection and classification. It is a new ensemble learning methodology that offers many advantages over similar methods, including built-in features, etc. Then, SHA-512 is used to secure the communication that employs faster performance, allowing the transmission of more data with the same security level. The performance of the proposed AI-ADP scheme is evaluated based on various parameters, such as attack-detection accuracy, cycles used per byte, and total cycles used. The proposed AI-ADP scheme outperformed the existing approaches and obtained 99.12% accuracy, which is relatively high compared to the pre-existing methods.