The most technologically consequential materials are often the rarest: they occupy narrow regions of chemical space, obey competing physical constraints, and appear only sparsely in existing databases. High-kappa dielectrics, high-Tc superconductors, and ferromagnetic insulators are to name a few. This scarcity fundamentally limits today's data-driven materials discovery, where machine-learning models excel at interpolation but struggle to generate genuinely new candidates. Here, we introduce DielecMIND, an artificial intelligence framework that reframes materials discovery as a reasoning-driven exploration instead of a database-screening problem. Using high-kappa dielectrics as a data-scarce and technologically stringent test case, DielecMIND combines large-language-model hypothesis generation for the first time with physics validated first-principles calculation to navigate chemical space beyond known compounds. Prior to our work, only 14 experimentally or computationally validated materials with kappa > 150 were known. Our framework discovers and validates 5 new such compounds, expanding this rare-materials class by a remarkable = 35% in a single study. Among them, we find that Ba2TiHfO6 exhibits a dielectric constant of 637, minimal loss at low optical frequencies, and stability up to 800 K. Beyond dielectrics, this work demonstrates a new paradigm for artificial-intelligence-guided discovery: one that generates a small number of physically grounded, experimentally plausible candidates yet measurably expands sparsely populated functional materials spaces. Thus, DielecMIND points toward a general strategy for discovering rare, high-impact functional materials where data scarcity has long constrained progress.