This paper studies how a virtual world is utilised as a learning environment in an online course in higher education. The aim is to explore how this setting currently facilitates online education, and to identify those issues of interactivity that are essential in this context. The study builds on an ethnographic approach and data were collected through observations, recordings and interviews. The most important finding from this study is that the virtual world provides enhanced interactivity because it allows for synchronous communication and places the student in a spatial dimension. In order to make full use of this enhanced interactivity, the users' technical skills must be improved and the technical problems associated with computer-generated environments must be resolved. As more and more students get acquainted with virtual world environments, new rules for social interaction emerge; when students have become used to interacting through avatars, we will be able to see the true potential of interaction in these settings.