AI ethics research has mainly focused on high-level principles and guidelines, and technical issues. This position paper argues that more attention should go to the practical and contextual aspects of designing AI applications and explores how living labs can contribute to the ethical design, development and deployment of AI. Literature on AI ethics is discussed, and the term ‘Responsible Applied AI’ (RAAI) is introduced to refer to the ethical application of AI. Five requirements for the development of RAAI in a living lab are distinguished. Subsequently, the paper brings together literature from Open Innovation and Human Computer Interaction to examine the suitability of different types of living labs for developing RAAI. It concludes that Innovation Spaces (online and physical) combined with temporary and ethically governed Instrumented Places and People could be a fruitful environment for a living lab for RAAI. Implications and challenges for further research and practice are discussed.