Abstract: This research paper explores "Fox Fables," a 2D adventure game developed with the Unity game engine, emphasizing dynamic storytelling and AI-driven gameplay. Players assume the role of Felix, a clever fox navigating an intricately designed world with unique characters and narratives. The Unity engine serves as the project's backbone, enabling the creation of visually stunning environments, 2D characters, and seamless gameplay mechanics. NPC characters, including Grunt Eagles, Frogs, and the formidable Gorilla, are brought to life through specific AI algorithms, such as pathfinding, Finite State Machines, and Behaviour Trees. A standout feature is the dynamic narrative system, adapting to player choices and influencing character alliances. Sparrow, Turtle, and Cat, as static NPCs, offer guidance, items, and in-game purchases. Player choices shape alliances, conflicts, and distinct outcomes in the climactic Dark Theme, where Felix faces the Gorilla in a final battle. Unity's user-friendliness and scalability contributed to an immersive and engaging gaming experience. AI algorithms effectively create realistic NPC behaviours, enriching gameplay. The dynamic narrative system enhances player engagement, providing unique storylines. In conclusion, "Fox Fables" exemplifies the fusion of narrative-driven gameplay and AI-driven character interactions. It underscores the potential of the Unity game engine and dynamic storytelling in modern game development, contributing insights to the broader field.