Listening to and recounting stories is a terrific exercise for toddlers as it helps them think of a series of events and to develop their language skills. Sit down with a story that you enjoy and read it to them. At the end, ask them to act out the story themselves, with the help of a few props such as teddy bears, dolls and other relevant toys. See whether they are able to recall the story and act it through. Help them through if they struggle to remember it, you could even read the story again and again in order to help them.
Young children have the most remarkable memories and will quickly learn whole stories, such as The Gruffalo or Fix It Duck, after hearing it just a small number of times. If they can learn a book then have them recite the whole book and act along with their props. Books that rhyme are easier to learn because of their rhythm but even fairly long passages of prose can be committed to eager young memories with little practice.
Have your little ones take on the different characters in a story, and use different voices for the different roles. You can play along too, take on one of the roles, or perhaps act as narrator to tell the overall story while they act out the details.