Community-based social participation has shown promise in delaying cognitive decline in older adults with mild cognitive impairment (MCI) who are at risk of developing dementia. Although group storytelling interventions have proven effective, the need for a skilled workforce to support people with MCI can limit broader community implementation. Technology-based interventions may offer a solution to this limitation by replicating the abilities of therapists. This study aims to co-design a digital storytelling intervention and evaluate its usability. This co-design process involved 3 stages, engaging people with MCI (n=12), their caregivers (n=4), and therapists (n=5) in Beijing, China. In the first stage, we used card sorting and voting methods to identify potential incentives for social participation and target the specific abilities that people with MCI wanted to enhance. In the second stage, we conducted brainstorming sessions with people with MCI and their caregivers to identify the potential features of a digital storytelling application named Huiyou ("meeting new friends" in Chinese). Finally, we assessed Huiyou's usability with people with MCI and therapists, leading to iterative improvements based on the usability findings. We uncovered a crucial link between boosting the self-confidence of people with MCI and their ability to address social participation challenges. Notably, we identified memory improvement and enhanced language expression as key factors for effective communication with grandchildren. Subsequently, participants suggested features and interfaces to address these challenges, leading to the development of Huiyou, a group-based digital storytelling application featuring functions such as generating story materials, conducting memory retrieval activities, and sharing stories. It received an "excellent" rating in the User Experience Questionnaire benchmark, displaying high levels of attractiveness, dependability, stimulation, and novelty. People with MCI achieved an average task completion rate of 87% (n=19; SD 0.13) of the 22 tasks. However, feedback from people with MCI and therapists highlighted usability issues in navigation, activity management, user interface, and feature optimization, indicating a need for improved accessibility and efficiency. The co-design approach contributed to developing the Huiyou prototype, supporting community-based social participation. User feedback highlighted the potential of Huiyou to enhance well-being and facilitate meaningful social interactions while maintaining crucial existing relationships.