Collaborative virtual environment (CVE) concepts have been used in many systems in the past few years. Applications of such technology range from military combat simulations to various civilian commercial applications. The architectures available today provide support for a number of users, but they fail if too many users are together in a small “space” in the virtual world. This paper introduces VELVET, an adaptive hybrid architecture that allows a greater number of users to interact through a CVE. This is accomplished through an adaptive filtering scheme based on multicasting. VELVET also supports small groups of users, but its use in large environments shows the greatest potential, better handling local concentrations of activity than region-, cell-, or locale -based approaches. VELVET introduces a novel adaptive area of interest management that supports heterogeneity amongst the various participants. This allows users in a supercomputer with high-speed networking to successfully collaborate with others in not-so-powerful systems behind a slow dial-up connection.