The present study investigated how challenge-based learning (CBL) in physical education (PE) may affect students’ basic psychological needs (BPNs), motivational regulations, engagement, and learning in comparison with a traditional teaching (TT) methodology. A quasiexperimental study with experimental and control groups was carried out. In total, 50 participants (16 boys and 34 girls) between 13 and 15 years old (Mage = 13.35, SD = 0.62) were involved in the experience for 6 weeks (ncontrol = 24; nexperimental = 26). Validated questionnaires were administered both before and after the intervention in both groups. Furthermore, theoretical knowledge and badminton-specific motor skill tests were carried out in both groups after the intervention. An analysis showed that after the intervention, students in the CBL condition improved their autonomy (Mbefore = 3.15 vs. Mafter = 3.39; ES = 0.26 *), competence (Mbefore = 4.01 vs. Mafter = 4.18; ES = 0.33 *), and relatedness satisfaction (Mbefore = 3.86 vs. Mafter = 4.06; ES = 0.32 *). As for behavioural engagement measures, students in the CBL condition exhibited higher scores after than those from before (Mbefore = 4.12 vs. Mafter = 4.36; ES = 0.35 *). No significant changes were observed for motivational regulations or agentic engagement. On learning outcomes, students in the experimental group achieved higher scores in both theoretical knowledge (Mcontol = 6.48 vs. Mexperimental = 6.79) and badminton-specific motor skills (Mcontol = 6.85 vs. Mexperimental = 7.65) than the control group did. The present study findings highlight that CBL might be a valid and effective methodological approach for students in PE to achieve adaptive motivational, behavioural, and learning outcomes.