In this paper, we present research results and future challenges in creating realistic and believable virtual humans. To realize these modeling goals, real-time realistic representation is essential, but we also need interactive and perceptive virtual humans to populate the virtual worlds. Three levels of modeling should be considered to create these believable virtual humans: 1) realistic appearance modeling, 2) realistic, smooth and flexible motion modeling, and 3) realistic high-level behaviors modeling. At first, the issues of creating virtual humans with better skeleton and realistic deformable bodies are illustrated. To give a level of believable behavior, challenges are laid on generating on the fly flexible motion and complex behaviors of virtual humans inside their environments using a realistic perception of the environment. Interactivity and group behaviors are also important parameters to create believable virtual humans which have challenges in creating believable relationship between real and virtual humans based on emotion and personality, and simulating realistic and believable behaviors of groups and crowds. Finally, issues in generating realistic virtual clothed and haired people are presented