This chapter explores learning design and teacher competencies for the effective integration of artificial intelligence (AI) tools and devices in early childhood education (ECE) by drawing on insights from digital learning experiences conducted with children aged 4 and 5 years. We begin by examining the potential of AI in early childhood education, outlining curriculum aligned with competency frameworks and reviewing existing research on how AI-driven educational tools potentially shapes young children’s emerging digital literacy. A synthesis of current AI literacy frameworks informs the development of a play-based inquiry learning program grounded in the Five Big Ideas of AI: Perception, Representation & Reasoning, Learning, Natural Interaction, and Societal Impact. Example learning experiences are provided to illustrate how children actively explore AI concepts through hands-on activities, such as storytelling with AI, interacting with voice assistants, and role-playing AI-driven problem-solving scenarios. These experiences highlight how AI systems process information, learn patterns, and interact with users, fostering both computational thinking and ethical awareness in young children. Using this foundation, we then identify the specific competencies early childhood educators require to critically engage with AI-powered devices, platforms, and interactive experiences designed for young learners. The chapter further articulates pedagogical principles for integrating AI into early years education, emphasizing a child-centered inquiry approach, balancing digital and non-digital interactions, and ethical considerations in AI use. The recommended AI-specific digital competencies, aligned with quality pedagogical practices aim to strengthening early childhood educators’ capacity to navigate AI’s role in early learning. This chapter contributes to building a future-ready framework for AI literacy in early years education.