This National Science Foundation funded project utilizes graphical multi-user virtual environments (MUVEs) as a vehicle to study (1) classroom-based situated learning and (2) the ways in which virtual environments may aid the transfer of learning from classroom contexts into real world settings. In the project's River City curriculum, teams of middle school students are asked to collaboratively solve a simulated 19th century city's problems with illness, through interaction with each others' ‘avatars', digital artifacts, tacit clues, and computer-based ‘agents' acting as mentors and colleagues in a virtual community of practice. This paper describes the design-based research strategy by which we are currently extending an educational MUVE environment and curriculum developed with prior NSF funding. We are implementing a series of studies to determine if such virtual environments can sufficiently replicate authentic contexts and multi-leveled communities of practice to provide students with classroom experiences in situated learning.