This session proposes how to define and teach “AI literacy” in liberal arts classrooms for the increasingly AI-integrated world. Unguided AI use does not automatically produce literacy; instructions focused solely on a technical capacity will become outdated at every major model change. Instead, AI literacy must be captured as a disposition, or a durable habit of the mind, that emphasizes the value of human judgment in ever-changing technological landscape. The pedagogical task is to cultivate this disposition through intentional hands-on engagement that turns AI use into an object of guided critical inquiry: observing, iterating, and evaluating human-AI interaction and developing sound judgment for responsible human-AI collaboration. Participants will experience a short AI literacy activity that reveals a commonly held misconception about AI and debrief how guided encounters can help students examine AI behavior, their own assumptions, and the ethical choices involved in learning with AI.