Reearch into virtual environments on the one hand and artificial intelligence and artificial life on the other has largely been carried out by two different groups of people with different preoccupations and interests, but some convergence is now apparent between the two fields. Applications in which activity independent of the user takes place — involving crowds or other agents — are beginning to be tackled, while synthetic agents, virtual humans and computer pets are all areas in which techniqes from the two fields require strong integration. The two communities have much to learn from each other if wheels are not to be reinvented on both sides. This paper reviews the issues arising from combining artificial intelligence and artificial life techniques with those of virtual environments to produce just such intelligent virtual environments. The discussion is illustrated with examples that include environments providing knowledge to direct or assist the user rather than relying entirely on the user’s knowledge and skills, those in which the user is represented by a partially autonomous avatar, those containing intelligent agents separate from the user, and many others from both sides of the area.