A significant proportion of human activities involving space orientation, locomotion and action occur over a critical span of space of about 2 to 25m from the observer. Yet, the mechanisms underlying the abilities to flawlessly perform these activities in the intermediate distance range are not well understood, though appreciated whenever the abilities are impaired due to brain injuries. How is space perception impaired? A key to answering this question is to understand how human perception in the intermediate distance range is referenced relative to the physical space. An early theoretical answer to this question was provided by Gibson (1950), who proposed that space perception in the intermediate distance range is highly influenced by the structure of the ground surface. The current proposal presents some empirical evidence to support the ground reference idea, in addition to presenting new hypotheses to uncover the perceptual mechanisms underlying space perception in the intermediate distance range. Three broadly defined issues will be addressed. These are: 1. How does the visual system define the ground surface reference frame for distance judgment? 2. How is the eye level determined and calibrated? 3. How is an object above the ground surface localized? This research will be conducted both in the real and virtual reality environments. The latter not only provides for a controlled stimulus environment, but will also provide valuable insights into designing virtual reality systems with high immersion quality, which will be of benefit to those interested in the vocational and therapeutic usage of the virtual reality systems. Above all, this research will advance the knowledge of how the ground surface is represented by the brain, and how it is employed as a reference frame for localizing objects, which is an important step to understanding space perception and cognition.