Smith, of Queenstown, has sold 400,000 copies of his debut book Wonky Donkey and albums in New Zealand and Australia. He's followed it up with two more best-selling books, Wilbee The Bumble Bee and Kaha The Kia.
O'Brien, 35, originally from Dunedin, is now living in England, where he reached the top of the UK iTunes Children's Album Charts in June with his debut album The Yes I Can Club.
He was a headliner in the Kidz Field at the Glastonbury music festival earlier this year.
"To have a Number One in the charts and headline at the same festival as the Rolling Stones was humbling," he said.
Mr Yipadee was created after O'Brien lost his job in May last year.
"It was gut-wrenching to lose my job with a six-month-old daughter," he said. "To be doing this just over a year later is a real dream come true."
The two entertainers started their Fun Tour in Queenstown and will perform in more than 30 towns and cities during the school holidays.