Despite its benefits for children’s skill development and parent-child bonding, many parents do not often engage in interactive storytelling by having story-related dialogues with their child due to limited availability or challenges in coming up with appropriate questions. While recent advances made AI generation of questions from stories possible, the fully-automated approach excludes parent involvement, disregards educational goals, and underoptimizes for child engagement. Informed by need-finding interviews and participatory design (PD) results, we developed StoryBuddy, an AI-enabled system for parents to create interactive storytelling experiences. StoryBuddy’s design highlighted the need for accommodating dynamic user needs between the desire for parent involvement and parent-child bonding and the goal of minimizing parent intervention when busy. The PD revealed varied assessment and educational goals of parents, which StoryBuddy addressed by supporting configuring question types and tracking child progress. A user study validated StoryBuddy’s usability and suggested design insights for future parent-AI collaboration systems.