This paper describes a simulation framework for sensor-based systems based on Second Life, a popular virtual 3D multi-user online world. With this platform, the components of sensor-based systems can be mapped to, or represented by, virtual devices and objects. The intuitive user interface of Second Life (SL) and its comprehensive visualization capability support evaluation tasks of ubiquitous computing applications. Developers, as avatars, can directly control and manipulate virtual devices. In this way, different settings of sensor-based systems can be tested, and interactively improved. A bidirectional interface between sensor-based systems and Second Life has been implemented to demonstrate Second Life as a testbed for an RFID-based positioning system.