This study introduces an advanced interactive virtual reality exposure therapy (VRET) system tailored for pediatric pain management, motivated by initial trials that revealed the limitations of VR alone in adult pain relief during cystoscopy and the promising results when combined with physical interaction in paediatric patients. Traditional VRET systems lack real-time adaptive feedback and tactile integration, which this system addresses by incorporating a sensor-enabled stress ball with a force-sensitive resistor (FSR) sensor. This sensor captures tactile feedback such as grip force, squeeze frequency, and duration, transmitting the data wirelessly to a Virtual Reality Therapy application. Initial trials conducted at the Asiri Central Hospital, Sri Lanka demonstrated that while VR alone was insufficient for adult pain management, with patients reporting high pain scores (7–9/10) during cystoscopy procedure. And during a trial conducted with the admitted Dengue patients at Royal Hospital, Sri Lanka, the combining VR with physical interaction significantly reduced pain scores in paediatric patients (1–5/10) and enhanced their engagement. These findings shifted the focus towards developing an interactive VR therapy specifically for children, integrating tactile feedback for a more immersive and responsive experience.