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Augmented reality with direct user interaction is described. In one example, an augmented reality system comprises a user-interaction region, a camera that captures images of an object in the user-interaction region, and a partially transparent display device which combines a virtual environment with a view of the user-interaction region, so that both are visible at the same time to a user. A processor receives the images, tracks the object's movement, calculates a corresponding movement within the virtual environment, and updates the virtual environment based on the corresponding movement. In another example, a method of direct interaction in an augmented reality system comprises generating a virtual representation of the object having the corresponding movement, and updating the virtual environment so that the virtual representation interacts with virtual objects in the virtual environment. From the user's …