This chapter introduces the foundational principles of AI Ethics by Design, emphasizing the integration of ethical considerations throughout the AI system development lifecycle. It covers key ethical challenges posed by artificial intelligence—including bias, privacy, accountability, and transparency—and explores how engineering disciplines can embed ethical reasoning into the requirements, design, implementation, and evaluation phases of AI systems. The chapter also presents ethical frameworks and regulatory guidelines, encouraging the development of socially responsible and technically robust AI systems through a proactive, design-oriented approach. This chapter introduces the concept of “AI Ethics by Design” (AbD), focusing on integrating ethical considerations into the AI development lifecycle from the outset. The aim is to create inherently ethical AI systems by embedding ethics throughout the stages of AI development, including design, implementation, and maintenance. Key principles such as fairness, transparency, privacy, safety, and accountability are highlighted. The chapter evaluates the processes, methods, and techniques for embedding ethical considerations into AI systems and discusses benefits and challenges with illustrative examples, diagrams, critical evaluations, exercises, and multiple-choice questions (MCQs).