In this paper, I report on the findings of a study that investigated non-native speaker interaction in a three dimensional (3D) virtual world that incorporates avatars and text chat known as "Active Worlds." Analysis of the chat transcripts indicated that the 24 intermediate level EFL participants were able to undertake a variety of tasks through target language interaction. Moreover, I found evidence in the corpus that over 3 chat sessions the subjects employed transactional communication strategies (424) and also interactional strategies (382). Further analysis revealed that instances of negotiation of meaning focusing on lexis occurred. However, negotiation was infrequent across the 3 task types administered. Task type appeared to influence the quantity of negotiation, with more negotiation occurring in the decision-making task than in the jigsaw and opinion-exchange tasks. In addition, post-study questionnaires indicated that the avatars enhanced the subjects' sense of telepresence and that the learners made use of their communicative features during the interaction. The analysis further suggested that the use of avatars facilitated learner interaction management during real time CMC. In this research, I attempted to account for the use of the above strategies and found that the learner interaction was influenced by the complex interaction of a number of variables including task type, sociolinguistic factors, context of use and the mix of technical affordances provided by "Active Worlds." This paper concludes by identifying areas of potential for future research in the use of avatar-based virtual worlds in computer assisted language learning (CALL). (Contains 2 figures and 4 notes.)