This chapter explores how generative AI—including image and video generation tools—can be meaningfully integrated into early and elementary literacy curriculum and instruction. Grounded in teacher education programs, we identify four areas of pedagogical application through which AI can support the development of multimodal, culturally and linguistically responsive, and technology-integrated phonics and literacy instruction. First, AI image tools can be used to create decodable books aligned with phonics patterns, enabling preservice teachers to design attractive visual aids. Second, the creation of bilingual books promotes the inclusion of students’ home languages, fostering biliteracy and cultural relevance through the use of generative AI image tools, read-aloud applications, and translation technologies. Third, AI-generated image–vocabulary pairs offer differentiated scaffolding to support diverse learners in vocabulary acquisition. Lastly, text-to-video tools provide accessible read-aloud support, particularly for emerging bilinguals and students with learning differences. Through concrete examples, project procedures, and classroom applications, this chapter highlights the potential of AI as a pedagogically embedded resource—rather than a standalone tool—for enhancing equity, creativity, and inclusivity in literacy education. By showcasing practices in teacher preparation, we demonstrate how thoughtful AI integration can expand instructional possibilities and equip educators to navigate the future of literacy teaching in digitally mediated, multilingual classrooms.