AI and digital systems and applications were supposed to increase democratic participation and activism, but the trend has been quite the opposite. With the help of various applications, democratic elections and decision-making have faced new challenges and threats. With digitalization and artificial intelligence, we have entered an era marked by the weakening of traditional democratic institutions and the transition from party democracy to clickbait democracy and populism. The rise of populism and political manipulation challenge the ethics of artificial intelligence. The change highlights the concentration of digital power in the hands of a few Internet giants and the potential threats this poses to democracy, participation, and the exercise of public authority. Artificial intelligence and digitalization affect the roles of government and citizenship, the public operating environment, the democratic relationship between participation and representation, and issues related to various rights. At the same time, citizens’ interest in and participation in democratic decision-making and participation have declined and, in some places, even turned into passivity. This chapter assesses the challenge posed by digitalization through three levels of democracy: democratic values and ideology, institutions of democracy, and human behavior and participation. The chapter assesses what kind of more ethical and democratic digital space is needed to ensure the principles of democracy, the rule of law, and human rights in AI design and deployment. The chapter also discusses AI’s challenge to democratic political decision-making, such as influencing election processes, the role of algorithms in reinforcing societal prejudices, and the impact of misleading information and fake news on public opinion. The chapter assesses the need and opportunities to move away from techno-deterministic approaches and focus on solving society’s problems and enhancing democratic legitimacy in the age of artificial intelligence. Democracy can be strengthened by, for example, bringing it closer to local communities and strengthening local democratic debate and decision-making at the local level.