Ayer Itam (formerly spelt as Air Itam) is a suburb of George Town in the Malaysian state of Penang. Nested within the central valleys of Penang Island, it is located approximately 6 km (3.7 mi) southwest of the city centre. The suburb is home to Kek Lok Si, touted as the largest Buddhist temple in the country.

Ayer Itam got its name from the murky waters of the Air Itam River (Malay: Sungai Air Itam). The phrase 'Air Hitam' means black water in Malay.

Soon after the founding of Penang Island in 1786, British East India Company officials, led by Captain Francis Light, began exploring and clearing the interior of the island for agricultural purposes. Pepper and nutmeg farms were then established at the hills of Ayer Itam, while Light also commissioned the planting of strawberries at Penang Hill. The Anglo-Indian Suffolk House, one of Light's residences, was also built within a pepper estate by the Air Itam River.

The agricultural village of Ayer Itam grew throughout the 19th century, populated by farmers who owned the fruit and vegetable farms at the surrounding hills. To this day, fresh produce are produced at the foothills of Ayer Itam and distributed daily to the wet markets all over the city.

In 1890, construction of the Kek Lok Si Temple, now one of the largest Buddhist temples in Southeast Asia, commenced. Its main pagoda combines Chinese, Siamese and Burmese styles. The temple was finally opened to the public in 1905.

Ayer Itam was once home to the Penang Zoological Gardens, the first zoo in Malaysia. Supposedly opened in the 1920s by a monk named Fa Kong, the zoo was shut down for good prior to World War II due to the excessive maintenance costs.

The Great Ayer Itam Fire of 1935 destroyed more than 100 homes in the area. At the time, the residences at Ayer Itam were mostly wooden; this incident led to the construction of brick buildings within the suburb.

The area was also a hinterland which hid refugees fleeing from the episodes of violence that had occasionally erupted in the city. For instance, the Penang Riots of 1867 forced some residents within the city centre to evacuate to Ayer Itam. World War II, however, brought even greater numbers of refugees to the suburb. During the war, when the Imperial Japanese Army implemented the Sook Ching purges, Ayer Itam became one of the sites where Chinese civilians were massacred.

The urbanisation of Ayer Itam since the 1950s has brought about a concurrent increase in living standards and transformed the landscape with more high rises, making the suburb one of the more densely populated areas in George Town.

Located in the valley between Batu Lanchang Hill, Bukit Penara and Penang Hill, this suburb of George Town is connected to the city centre by two main roads, Ayer Itam Road and Batu Lanchang Lane. It is also connected to Paya Terubong and the south of the island via Paya Terubong Road. The suburb covers an area of 1.8 km (0.69 sq mi) and includes neighbourhoods developed later in the post-independence era such as Rifle Range.