Set up your dredging station. In one bowl, whisk together the flour, salt, and pepper. In another bowl, whisk together the coconut and panko. In a third bowl, whisk together the eggs and water.

Prep. Preheat the air fryer to 375°F and grease the basket with non-stick cooking spray (I like using coconut cooking spray for this recipe). Line a baking sheet with parchment paper.

Bread the shrimp. One handful at a time, coat the shrimp in the flour mixture and then dip it in the egg mixture. Finally, coat the shrimp in the coconut mixture. Arrange the breaded shrimp in a single layer on the prepared baking sheet. Repeat with the remaining shrimp.

Air fry. Arrange the shrimp in a single layer in the basket of the preheated air fryer. Be careful not to crowd the basket. If you need to fry in batches, do so. Air fry for 5 minutes, flip, and air fry for another 5 minutes.

Serve. Serve hot with sweet chili sauce.