The described virtual clay modeling project explores the use of virtual environments (VEs) for the simulation of two-handed clay modeling and sculpting tasks. Traditional clay modeling concepts are implemented and enhanced with new digital design tools leveraging from virtual reality (VR) and new input device technology. In particular, the creation of an intuitive and natural work environment for comfortable and unconstrained modeling is emphasized. VR projection devices, such as the Immersive WorkBench, shutter glasses, and pinch gloves, equipped with six-degree-of-freedom (6DOF) trackers, are used to apply various virtual cutting tools to a volumetric data structure (octree). The employment of an octree as underlying data structure far volume representation and manipulation in immersive environments allows real-time modeling of solids utilizing a suite of either geometrically or mathematically defined cutting and modeling tools. A virtual clay model is encoded as an octree, preserving its volumetric and physical properties and design history. Incremental undo/redo functionality for rapid transitions between different modeling states increases the efficiency and flexibility, while advanced features of the primitive and wire cutting tools, such as the removal of single layers from a day model, enhance the modeling procedure to a level of precision hardly achievable at this level of detail in real clay modeling. Models can be passed to a raytracer or exported as either triangular or tetrahedral meshes. The resulting work environment can be utilized beyond the targeted application of virtual clay modeling, for example for the visualization and analysis of medical data.