This paper explores avatar identification in creative storytelling applications where users create their own story and environment. We present a study that investigated the effects of avatar facial similarity to the user on the quality of the story product they create. The children told a story using a digital puppet-based storytelling system by interacting with a physical puppet box that was augmented with a real-time video feed of the puppet enactment. We used a facial morphing technique to manipulate avatar facial similarity to the user. The resulting morphed image was applied to each participant’s puppet character, thus creating a custom avatar for each child to use in story creation. We hypothesized that the more familiar avatars appeared to participants, the stronger the sense of character identification would be, resulting in higher story quality. The proposed rationale is that visual familiarity may lead participants to draw richer story details from their past real-life experiences. Qualitative analysis of the stories supported our hypothesis. Our results contribute to avatar design in children’s creative storytelling applications.