Halve the baby potatoes and place them in a large bowl. Drizzle with olive oil and toss until each piece is evenly coated.
In a small bowl, stir together the parmesan cheese, garlic powder, Italian seasoning, smoked paprika, salt, and black pepper. Sprinkle the parmesan mixture over the oiled potatoes and toss well, making sure every potato half gets a generous coating.
Preheat the air fryer to 400 degrees F for 2 minutes. Arrange the potatoes in a single layer in the basket, cut-side down, so the flat surface gets maximum contact with the heat. Work in batches if needed to avoid overcrowding.
Air fry for 15 to 18 minutes, shaking the basket once at the 10-minute mark, until the potatoes are golden and crispy on the outside and fork-tender on the inside. The parmesan should form a beautiful golden crust.
Transfer to a serving plate, sprinkle with fresh chopped parsley and an extra dusting of parmesan if desired, and serve immediately while hot and crispy.