Objective: This study aims to analyze the integration of artificial intelligence (AI) in Islamic education of the Malay community and identify emerging ethical opportunities and challenges. Its main focus is the alignment of the use of AI with Islamic values and principles. Theoretical framework: The research uses a multidisciplinary framework that combines Islamic ethics and modern AI ethics. This framework is used to assess the moral, spiritual, and technological implications of the application of AI in Islamic education. Literature review: A literature review discusses the use of AI in education, AI ethics, and Islamic educational philosophy. The literature shows that AI increases the effectiveness of learning, but also raises issues of privacy, dehumanization, and reduced moral-spiritual value. Methods: This study uses a qualitative approach through semi-structured interviews with educators, policymakers, and AI experts from Malaysia, Indonesia, and Brunei. The data is thematically analyzed to identify opportunities and challenges of AI integration. Results: The results show that AI can improve learning effectiveness, knowledge access, and educational personalization. However, there are challenges related to data privacy, dehumanization of learning, and the preservation of moral and spiritual values. Implications: The research confirms the importance of developing AI policies, curricula, and implementations that are aligned with Islamic ethics. Collaboration between governments, educational institutions, and technology developers is needed to support ethical digital transformation. Novelty: The novelty of this research lies in the integration of Islamic ethics and AI ethics in the context of Islamic education of the Malay community. The study also offers a cross-border perspective involving Malaysia, Indonesia, and Brunei.