Virtual environments have always been considered as a means for more visceral and efficient human computer interaction by a diversified range of applications. The spectrum of applications includes analysis of complex scientific data, medical training, military simulation, phobia therapy and virtual prototyping. Evolution of ubiquitous computing, current user interaction approaches with keyboard, mouse and pen are not sufficient for the still widening spectrum of Human computer interaction. Gloves and sensor based trackers are unwieldy, constraining and uncomfortable to use. Due to the limitation of these devices the useable command set based diligences is also limited. Direct use of hands as an input device is an innovative method for providing natural Human Computer Interaction which has its inheritance from text-based interfaces through 2D graphical-based interfaces, multimedia-supported interfaces, to full-fledged multi-participant Virtual Environment (VE) systems. Conceiving a future era of human-computer interaction with the implementations of 3D application where the user may be able to move and rotate objects simply by moving and rotating his hand - all without help of any input device. This paper centralizes on the efforts of implementing an application that employs computer vision algorithms and gesture recognition techniques which in turn results in developing a low cost interface device for interacting with objects in virtual environment using hand gestures. The prototype architecture of the application comprises of a central computational module that applies the camshift technique for tracking of hands and its gestures. Haar like technique has been utilized as a classifier that is creditworthy for locating hand position and classifying gesture. The patterning of gestures has been done for recognition by mapping the number of defects that is formed in the hand with the assigned gestures. The virtual objects are produced using Open GL library. This hand gesture recognition technique aims to substitute the use of mouse for interaction with the virtual objects. This will be useful to promote controlling applications like virtual games, browsing images etc in virtual environment using hand gestures.