Collaborative virtual environments (CVEs) hold great potential for people with autism. An exploratory empirical study was conducted to determine if children and youth with autism could understand basic emotions as represented by a humanoid avatar. Thirty-four participants (ages 7.8-16 years) reported to have autism interacted with a software program designed to evaluate their ability to identify and make inferences from facial expressions. Over 90% of the participants accurately recognized emotions displayed by avatar representations. These findings support the optimism that CVEs can be used effectively as an assistive technology, as an educational technology, and as a means of helping address potential theory-of-mind impairments.