This study explores the use of interactive Artificial Intelligence (AI)-interfaced robotic toys within early childhood (EC) settings to develop children's inquiry literacy. Arguments about the appropriate role of AI in EC education have received much attention when examining the potential of the integration of technology into children's play and learning. Using Vygotsky's mediation theory (1978) and employing a design-based research methodology, teachers intentionally used AI robotic toys to engage children (4-5 years old) during play experiences. The data from both teachers' and children's interviews, observations and artefact analysis revealed how children creatively collaborated with their peers to create a sustainable city for their robot and 'his' family to live happily. Children's play with the AI robot fostered inquiry literacies -- namely creative inquiry, emotional inquiry and collaborative inquiry. This study contributes to research by exploring the use of AI toys together with physical and artificial environments and offers a case to shape children's inquiry literacies. Implications lie in upskilling EC teachers to provide opportunities to play with AI-interfaced robotic toys to foster children's inquiry literacy development process.