Virtual development environment increases efficiency of embedded system development because it enables developers to develop, execute, and verify an embedded system without real target hardware. This chapter deals with an implementation of a virtual development environment for ARM core-based embedded systems. The environment is based on ARM’s ARMulator simulation environment and extended to use SystemC models by attaching a SystemC simulation engine to the ARMulator. Therefore, the environment can flexibly use both ARMulator-based and SystemC-based hardware models. We developed some hardware IP modules and user interface programs to enrich the environment for hand-held devices or general application development. In addition, a real-time operating system μC/OS-II is ported on the environment so that it can be used to develop multi-thread applications. Compared to other environments, its construction cost is very low and the environment can be easily modified according to an engineer’s needs.