In an endeavor to explore the notion of AI-generated folk music, the Varexian music project explores the creation of Varexia, a fictional musical culture conceived through the advanced capabilities of artificial intelligence. This interdisciplinary venture drew upon expertise in ethnomusicology, compositon, and machine learning to coax AI systems to generate, as genuinely authentic as possible, a fictitious music tradition. Varexians, conceived as ethereal beings whose existence and social structures are inherently tied to musical elements, interact with their environment and each other through a system of living instruments known as Sonic Fae. This project not only aimed to showcase the affordances of AI in rich world-building but also probes into the ethical, philosophical, and creative implications of such synthetic cultural creations. Throughout the project, we leveraged deep learning natural language systems to develop a library of unique sounds and musical structures that represent the Varexian auditory aesthetic. This yielded a chatbot that offers an interview with Varexian ethnomusicologist Elyra Vunaris, created using AI-driven text-to-speech and animation technologies. This presentation serves as both a demonstration of AI’s potential in creative domains and a medium for discussing broader implications in the fields of AI ethics, creativity, and the digital humanities. The findings highlight significant considerations in representational biases, the authenticity of AI-generated cultural artifacts, and the future of human-AI collaboration in artistic and scholarly contexts. It contributes to ongoing discussions about the role of AI in extending the boundaries of human creativity and the responsibilities entailed in creating new forms of cultural expression. Through the lens of the Varexian music project, we reflect on the transformative potential of AI in shaping future narratives and experiences in the arts and beyond.