Teddy Ruxpin is an animatronic children's toy in the form of a talking 'Illiop', a creature which looks like a bear. The toy's mouth and eyes move while he reenacts stories played on an audio tape cassette deck built into its back. While the character itself was created by Ken Forsse, the talking toy was designed and built by Forsse’s Alchemy II, Inc. employees, including Larry Larsen and John Davies. Later versions have a digital cartridge in place of a cassette.

At the peak of its popularity, Teddy Ruxpin became the best-selling toy of 1985 and 1986. The 2006 version was awarded the 2006 Animated Interactive Plush Toy of the Year award by Creative Child Magazine. A cartoon based on the characters debuted in 1986. Teddy's extreme popularity in 1986 buoyed the controversial launch of the Nintendo Entertainment System, also distributed by Worlds of Wonder.

Technology: Conventional cassette tapes carry two audio tracks for stereo sound reproduction. Teddy Ruxpin cassettes use the left track for audio and the right track for a control data stream. The data stream controls servomotors that move the eyes and mouth and can divert the audio signal to Grubby, the companion toy, by means of a proprietary cable. This allows the two to engage in pre-recorded interactions. Grubby only works with the original WoW version of Teddy Ruxpin.

If a conventional audio cassette is played in either the second or third generation models of the original Teddy Ruxpin, this is detected and its right audio track is ignored and Teddy will not move. The production eject mechanism was design by global design firm RKS Design. Early versions of the toy use three servo motors, but this was reduced to two and even one in later versions.

History: After the September 1985 debut, various toy makers have produced Teddy Ruxpin over the years. The first was Worlds of Wonder from 1985 until its bankruptcy in 1988. The cut rights were then sold to Hasbro, and produced again from 1991 to 1996. Another version debuted in 1998 by Yes! Entertainment, and another version in 2006 by BackPack Toys, owned and operated by Robert Taylor. The most recent version was produced by Wicked Cool Toys.

Shortly after his debut, Teddy Ruxpin was dubbed the "Official Spokesbear for the National Center for Missing and Exploited Children" in 1985.

Teddy Ruxpin was launched in 1985 by toy manufacturer Worlds of Wonder. Then came the companion toy Grubby, different outfits for Teddy and Grubby, and several other non-animatronic companion toys and characters. This includes two different versions of the bird-like Fobs (one orange, one purple) that are hand puppets with a sock-like, extendable neck. Other hand puppets are the larger Wooly What's-It, three interchangeable Anythings (This, That, The Other), Tweeg, and L.B. The Bounder.

Other items produced by Worlds of Wonder for Teddy Ruxpin are the Answer Box and Picture Show. Actress Joanna Kerns served as Teddy's spokesperson shortly after its introduction, while at the height of her fame as Maggie Seaver on the ABC-TV sitcom Growing Pains.

Teddy Ruxpin sales peaked in 1986. Worlds of Wonder launched a series of safety messages for children, with different partners including firefighters and the United States Lifesaving Association. WoW became the exclusive distributor for the launch of the smash hit Nintendo Entertainment System, based on leveraging the undeniable strength of Teddy Ruxpin and Lazer Tag.

To retailers who were bitterly adamant against hearing the words "video game" after having survived the video game crash of 1983, WoW salesman Jim Whims distinctly recalled delivering an ultimatum: "If you want to sell Teddy Ruxpin and you want to sell Lazer Tag, you're gonna sell Nintendo as well. And if you feel that strongly about it, then you ought to just resign the line now." Historian Steven Kent wrote: "Anyone who wanted to sell Teddy Ruxpin and Lazer Tag, including Sears and Toys R Us, was going to hear about the Nintendo Entertainment System." WoW received windfall sales commissions from selling the NES, and $800 million in back orders for the Christmas season, mainly for Teddy Ruxpin and Lazer Tag.

In 1987, Worlds of Wonder contracted with Wendy's restaurants to feature a Teddy Ruxpin themed Kid's Meal promotion. These are similar to the miniatures produced by Worlds of Wonder, except they are smaller and flocked. Teddy Ruxpin characters joined the Ice Capades program, which toured the country.

In 1987 management staff of Worlds of Wonder grossly overestimated the popularity and inventory requirements of Teddy Ruxpin, which was actually in declining demand and was dwarfed by the NES. The excessive parts orders for making Teddy Ruxpin overextended the company's assets, and the situation was worsened when stock trades by company officers spooked investors.

In response to devaluation, WoW issued Non-Investment Grade Bonds, commonly known as junk bonds, in an effort to buoy itself. Although there is some contention as to whether this strategy would have helped, the attempt was made moot by the 1987 stock market crash. Worlds of Wonder filed for bankruptcy protection and was liquidated in 1988. They went through a series of layoffs. The creditors continued to operate the company in receivership until finally closing in late 1990. By 1991, Worlds of Wonder had closed and the remaining assets were liquidated.