This paper introduces StoryTech, a smart storytelling toy that features a virtual space, which includes computer-based graphics and characters, and a real space, which includes plush toys, background cards, and a communication interface. When children put real objects on the receiver panel, the computer program shows related backgrounds and characters on the screen. StoryTech encourages children to produce their own stories. Empirical research with a total of 90 children indicated that StoryTech contributed to narrative activities of children and made a positive impact on their creativity. The paper also focuses on the attributes, design, and development process of StoryTech.