Abstract: In recent years, digital storytelling has demonstrated powerful pedagogical functions by improving creativity, collaboration and intimacy among young children. Saturated with digital media technologies in their daily lives, the young generation demands natural interactive learning environments which offer multimodalities of feedback and meaningful immersive learning experiences. Virtual puppetry assisted storytelling system for young children, which utilises depth motion sensing technology and gesture control as the Human-Computer Interaction (HCI) method, has been proved to provide natural interactive learning experience for single player. In this paper, we designed and developed a novel system that allows multiple players to narrate, and most importantly, to interact with other characters and interactive virtual items in the virtual environment. We have conducted one user experiment with four young children for pedagogical evaluation and another user experiment with five postgraduate students for system evaluation. Our user study shows this novel digital storytelling system has great potential to stimulate learning abilities of young children through collaboration tasks.