The Velveteen Rabbit - Margery Williams

The Velveteen Rabbit or How Toys Become Real is a children's novel written by Margery Williams. It chronicles the story of a stuffed rabbit and his quest to become real through the love of his owner.
A boy receives a Velveteen Rabbit for Christmas. The Velveteen Rabbit is snubbed by other more expensive or mechanical toys, the latter of which fancy themselves real. One day while talking with the Skin Horse, the Rabbit learns that a toy becomes real if its owner really and truly loves it.
When the boy's china dog is misplaced, the Velveteen Rabbit is given to the boy as a quick replacement by the maid. The Velveteen Rabbit soon takes his place as the boy's constant companion. The Rabbit becomes shabbier, but the boy loves him no matter what. In the woods near the boy's home, the Velveteen Rabbit meets actual rabbits, and learns about the differences between himself and the real rabbits when the real rabbits prove he is not real by his inability to hop and jump.

Your kids will love the illustrations.