Abstract: Recent innovations in deep learning have significantly enhanced the diagnosis of medical images, although they are based on the use of centralized data storage that pose severe threats to patient privacy and medical data security. To address this issue, this research proposes a Federated Learning (FL) model that is coupled with an optimized YOLOv8 network to detect the kidney stones on a computed tomography (CT) image and at the same time, protect privacy of the patients. The suggested system can help various medical organizations to jointly train a common model without exchanging the information about the patients. This is to ensure that data protection laws like GDPR and HIPAA are adhered to. The residual feature fusion and DropBlock regularization among other architectural improvements are also included in YOLOv8 to enhance detection robustness and minimize overfitting. Experimental analysis carried out on a distributed CT dataset demonstrated that the federated YOLOv8 model has a mAP at 50 of 0.733 and is able to keep the data confidential. Moreover, its lean design facilitates fast edge deployment and real-time inference across a clinical setting. Altogether, these findings indicate that Federated Learning is a safe and efficient solution to AI-assisted diagnosis in contemporary healthcare when combined with the use of sophisticated object detection models.