Although learning analytics dashboards (LADs) are being recognized as tools that can enhance engagement—a crucial factor for the success of asynchronous online higher education—their impact may be limited without a solid theoretical basis for motivation. Furthermore, the processes through which students make decisions using dashboards and engage are not well understood. This study aimed to design a LAD informed by self-determination theory and to investigate university students’ experiences with it. The findings, including those from stimulated recall interviews using eye-tracking data, shed light on how the LAD fosters student engagement. Interacting with the LAD fulfilled students’ basic psychological needs. Awareness and reflection on learning status facilitated by the LAD boosted enthusiasm for active learning participation. The LAD offered essential information to support autonomous, strategic decisions, empowering students to take proactive actions toward personal goals while reinforcing their belief in achieving them. Despite its potential benefits, various improvements have been identified to further enhance its effectiveness. Based on the findings, we discuss the implications of this study for future research in the field.