During the construction of deep foundation pits, closely monitoring the deformation of the foundation pit retaining structure is of vital importance for ensuring the stability and safety of the foundation pit and reducing the risk of structural damage caused by foundation pit deformation. While theoretical and numerical methods exist for displacement prediction, their practical application is often hindered by the complex, non-linear nature of soil behavior and the numerous influencing parameters involved, making direct calculation methods challenging for real-time prediction and control. To address this, this study proposes a novel and interpretable machine learning framework for modeling both vertical and horizontal displacements in foundation pit engineering. Six widely used machine learning algorithms—Decision Tree (DT), Random Forest (RF), Extremely Randomized Trees (ET), K-Nearest Neighbors (KNN), Extreme Gradient Boosting (XGB), and Light Gradient Boosting Machine (LGBM)—were developed and compared. To improve model performance, the Sparrow Search Algorithm (SSA) was employed for hyperparameter optimization, leading to the creation of hybrid models such as SSA-XGB and SSA-LGBM. The SSA-optimized XGBoost (SSA-XGB) model achieved superior performance, with R² values of 0.988 and 0.990 for vertical and horizontal displacement prediction, respectively, alongside the lowest RMSE (0.785 and 5.684) and MAE (0.562 and 2.427). Notably, the study also found that hyperparameter tuning does not consistently enhance model performance; in some cases, simpler baseline models such as unoptimized ET performed better in noisy environments. Furthermore, SHAP-based interpretability analysis revealed a strong mutual dependency between vertical and horizontal displacements: horizontal displacement was the most influential feature in predicting vertical displacement, and vice versa. Overall, the proposed SSA-XGB model offers a reliable, cost-effective, and interpretable tool for excavation-induced displacement prediction.