Traditionally, virtual reality systems use 3D computer graphics to model and render virtual environments in real-time. This approach usually requires laborious modeling and expensive special purpose rendering hardware. The rendering quality and scene complexity are often limited because of the real-time constraint. This paper presents a new approach which uses 360-degree cylindrical panoramic images to compose a virtual environment. The panoramic image is digitally warped on-the-fly to simulate camera panning and zooming. The panoramic images can be created with computer rendering, specialized panoramic cameras or by "stitching" together overlapping photographs taken with a regular camera. Walking in a space is currently accomplished by "hopping" to different panoramic points. The image-based approach has been used in the commercial product QuickTime VR, a virtual reality extension to Apple Computer's QuickTime digital multimedia framework. The paper describes the architecture, the file format, the authoring process and the interactive players of the VR system. In addition to panoramic viewing, the system includes viewing of an object from different directions and hit-testing through orientation-independent hot spots.