This research focuses on the inception and dynamics of an AI innovation ecosystem, with the aim of enhancing the broader comprehension of innovation ecosystems. Examining the challenges and governance issues faced in developing Manchester’s AI innovation ecosystem, it emphasizes the critical role of regional capabilities, institutional backing, and educational resources in fostering AI advancement. A mixed-methods approach is employed, centering on the Greater Manchester region, where the terminologies of “AI”, “innovation” and “ecosystem” are familiar and conjoined in various ways. The study explores the evolving relationships between such entities, shedding light on the dynamics of the AI ecosystem from the standpoint of innovation studies. Practically, it aims to provide actionable guidance for AI innovation ecosystem managers, offering a holistic view of the intricacies involved in nurturing AI innovation environments. Other fields of study and stakeholders in wider society should also find the analysis informative.