Literature on engineering education stresses the need for graduates to have skills such as working globally in a multicultural environment; working in interdisciplinary teams; sharing of tasks on a global, around the clock basis; working with digital communication tools and in a virtual environment. In addition, accreditation criteria include attributes such as problem solving, communication, life-long learning skills and ethics. Problem-based learning (PBL) is well established in traditional on-campus settings in many professions but its use in "virtual" or online environments is not well-documented, particularly in engineering. However, it is ideally suited to delivering many of the required attributes. A fully online PBL course has been successfully delivered to engineering students studying via distance education. Students work entirely in a virtual mode, conducting online team meetings and utilising a variety of technologies to communicate and solve complex, real-world engineering problems. Design, implementation and evaluation results are discussed. (Contains 2 tables and 6 figures.)