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In this paper we present an object representation based on the semantics and functionality of interactive digital items - virtual objects - within a virtual environment (VE). We consider every object participating in a VE application not only as a 3D shape, but as a dynamic entity with multiple visual representations and functionalities. This allows for dynamically scaling and adapting the object's geometry and functions to different scenarios. Some test applications are described to demonstrate the benefits of the semantics-based representation of interactive virtual environments, including autonomous characters and collaborative environments