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Research showed that there may be gaps between indigenous and non-indigenous outcomes in education. Since pictures are symbols that represent “real world,” studying children’s interacting with picture books may make us understand the connections in between children’s real world experiences and the development of world knowledge (Ganea, Pickard and DeLoache, 2008). Moreover, co-reading picture books may help indigenous children to develop their reading habits and interest and help increase their literacy ability. In this study, four literacy partners worked closely with four indigenous children by following Action Research’s four stages of plan, act, develop/observe, and reflect in the process of literacy activities. Action logs and books created by children were collected as major data to be analyzed with grounded theory.