Integrating Artificial Intelligence (AI) in academic contexts has emerged as an innovative approach to improve language teaching. Digital literacy can act as a possible protection for educators when facing the challenges posed by AI-based experiences. This research explores the interaction between digital literacy, self-efficacy, and well-being among English as a Foreign Language (EFL) educators in an AI-based context. Based on Self-Determination Theory (SDT), the study investigates how digital literacy meets the fundamental psychological requirements of EFL educators for competence, autonomy, and relatedness, which in turn affects their well-being and self-efficacy. To reach this aim, 341 EFL teachers attended and answered the three scales but among them, 319 valid questionnaires were gathered. A Structural Equation Modeling (SEM) approach was used to analyze the causal relationships among the variables. The findings reveal a significant positive correlation between well-being, self-efficacy, and digital literacy. Indeed, digital literacy was a significant predictor of both variables and could predict 21.5% of the variance in teacher efficacy and 8.1% of the variance in well-being. The research highlights the critical role of digital literacy in enabling EFL educators and fostering a supportive, efficient, and satisfying AI-based teaching perspective.