Virtual reality (VR) systems have been increasingly used in recent years in domains such as education, training, and rehabilitation. The effectiveness of VR systems relies on several critical factors, including interaction. Although interaction in real-life includes mutual encounters between two or more individuals through shared tangible objects, most VR interaction to date have not been like that. The goal of this project is to establish a research program that will ultimately shrink the boundary between the real and virtual worlds by incorporating mutual tangible embodied interactions between human users and virtual characters through shared objects that extend from virtual worlds into the real-world. This will increase the seamlessness of the system and the fidelity of the interaction, thereby preventing the technology from being an obstacle or distraction and enabling the user to derive more benefit from the VR experience. The research objectives are as follows: (1) To develop a custom VR system that affords the proposed novel mutual tangible embodied interaction between a human user and a virtual character. (2) To investigate the effects of the proposed form of interaction on user performance and experience in VR through controlled user studies and statistical analyses on the collected data. (3) To impact future VR research by disseminating the findings and reflections. In the envisaged custom VR system, the shared objects will be represented in two complementary forms: physical and virtual. The extension of the shared objects from the virtual world into the real world will be achieved through a custom projection surface and custom-developed mechanical systems. The projection surface will be modified so that only a portion of the physical object will be visible to the human user at all times, while the remaining complementary portion will be rendered digitally. The mechanical systems will include physical object parts, 3D printed attachments, microprocessors, actuators, and motion sensors. These mechanical systems will be employed for synchronizing the movements of the physical objects and their virtual counterparts in real time; as one of the agents (human or virtual) affects the corresponding form (physical or virtual) of the shared object (e.g., by moving or rotating it), the effect will be immediately observable on the other form. Project outcomes will benefit not only the users of VR systems through enhanced experiences with a novel form of interaction but also the researchers through new findings in human-computer interaction. The research will be carried out in three phases. Phase 1 includes the investigation and design refinement of the proposed mutual tangible embodied interaction, including object and transform modality, custom hardware and software, tasks, and performance measures. In Phase 2, iterative development and in-house testing activities will be completed. Finally, in Phase 3, evaluation activities that include controlled user studies will take place, which will be followed by data analysis, reflection, and dissemination of the results. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.