With the digital revolution of artificial intelligence (AI) in language education, the way how people write and create stories has been transformed in recent years. Although recent studies have started to examine the roles of AI in literacy, there is a lack of systematic review to inform how it has been applied and what has been achieved in story-writing. This paper reviews the literature on the use of AI in story-writing during the last 5 years. The discussion explores the year of publication, countries of implementation, educational levels, participants and research methodology. In terms of research context, most studies were carried out in universities in the United States, and children and adult learners were the two most common participants. Most studies involved the collection and analysis of quantitative data. After that, the mechanisms of using AI for story-writing are investigated in terms of the types, approaches, and roles of AI. The pedagogies used in the learning context of AI-supported story-writing are discussed. Finally, the benefits of using AI in story-writing are pointed out. The findings show that the literature has paid most attention to learners' creativity, writing skills, presentation skills, motivation, and satisfaction. The review also suggested that human-AI collaboration could effectively improve story creation. Some studies had trained high-level AI to help students write better stories. As findings from the current body of research are not conclusive, more work is needed in exploring challenges of using AI in story-writing. Lastly, a set of limitations and recommendations for future research are summarized in this study.