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Background: Artificial Intelligence (AI) literacy is a crucial part of digital literacy that all individuals should possess in today's technologically advanced world. Despite the potential benefits that AI education offers, little research has been done on how to teach AI literacy to children. Objectives: This study aimed to fill that gap by investigating how children were engaged in AI literacy activities that are supported by intelligent agents. These activities were implemented in a Hong Kong kindergarten with a class of six 5‐year‐olds (Mage = 62.83 months, SD = 2.91) over a 6‐week period. Methods: The study gathered data from multiple sources, including classroom observations, teacher interviews, and documents/artefacts. Results and Conclusions: The results showed that children could learn about AI through interaction with intelligent agents in embodied learning contexts. The findings of this study have implications for the broader field of digital technology education, particularly in the context of early childhood education. Lay Description: What is already known about this topic: Artificial Intelligence (AI) literacy is essential in today's world.Little research exists on engaging young children in learning AI literacy. What this paper adds: Technology‐enhanced embodied learning approach affords multimodality in enabling young children's learning with AI‐related agents.Project‐based learning and real‐life examples can enhance children's learning. Implications for practice and/or policy: Early exposure to AI can help children navigate the increasingly digital world.Practical approaches, such as embodied and multimodal learning, seem to be effective.Teachers can enhance children's digital learning by using pedagogical strategies like project‐based learning and real‐life examples. [ABSTRACT FROM AUTHOR]