The increasing incorporation of artificial intelligence (AI) in English as a foreign language (EFL) instruction has garnered much attention on the importance of technological elements in language instruction. However, while AI in education (AIED) is still in its early development, research on how learners' AI literacy affects their language learning outcomes is insufficient. Furthermore, studies examining the impact of learners' emotional states within the context of AIED are remarkably few. This study examines the interplay between AI literacy and EFL learners' willingness to communicate (WTC), emphasizing the mediating roles of learners' AI learning self-efficacy and foreign language classroom anxiety. This study utilizes structural equation modeling, analyzing data from 517 university students in China to construct a prediction model for WTC in AI-enhanced EFL contexts. The findings indicate that AI literacy improves self-efficacy in AI learning and diminishes classroom anxiety, both of which are significant mediators in the relationship between AI literacy and willingness to communicate. The study highlights the imperative of integrating AI literacy into EFL instruction to enhance learners' expressive confidence and mitigate fear. The findings improve understanding of the interplay between AI literacy, psychological factors, and language learning outcomes, offering practical insights for the integration of AI in EFL education.