Virtual reality (VR) technology holds promise as a virtual prototyping (VP) tool for mechanical assembly; however, several developmental challenges still need to be addressed before VP applications can successfully be integrated into the product realization process. This paper describes the development of System for Haptic Assembly and Realistic Prototyping (SHARP), a portable virtual assembly system. SHARP uses physics-based modeling for simulating realistic part-to-part and hand-to-part interactions in virtual environments. A dual-handed haptic interface for a realistic part interaction using the PHANToM® haptic devices is presented. The capability of creating subassemblies enhances the application’s ability to handle a wide variety of assembly scenarios at the part level as well as at the subassembly level. Swept volumes are implemented for addressing maintainability issues, and a network module is added for communicating with different VR systems at dispersed geographic locations. Support for various types of VR systems allows an easy integration of SHARP into the product realization process, resulting in faster product development, faster identification of assembly and design issues, and a more efficient and less costly product design process.