A plush toy system comprises a foam inner, formed into a character shape, made with a compressible foam. A flexible outer covering surrounds the foam inner and has an inner surface for contacting the foam inner. The foam inner and the flexible outer covering combine to form a plush toy. The system may include a package having at least one open side through which the plush toy traversed when compressed to fill an interior space of the package. In use, when the plush toy is compressed and contained within the package, upon opening of the at least one open side the plush toy at least partially expands out of the at least one open side of the package. When removed completely from the package the plush toy expands to the natural size of the plush toy, preferably three times its size or more when compressed.