Artificial intelligence (AI) is often highlighted as a transformative technology that can“address some of the biggest challenges in education today”(UNESCO, 2019). Introducing data-driven AI in classrooms also raises pedagogical and ethical concerns related to students’, teachers’ and teacher educators’ understanding of how AI works in theory and practice (Holmes, 2022; Sperling et al., 2022). This extended abstract presents initial findings from the first study conducted within the WASP-HS1-funded research project: "AI Literacy for Swedish Teacher Education - A Participatory Design Approach". The project aims to establish a scientific foundation for teaching AI literacy in teacher education (TE) programs.