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Predicting the future is a risky game, and can often leave egg on one's face. However when the organizers of the Intelligent Virtual Environments workshop at the European Conference on AI predicted that the field of Intelligent Virtual Agents would grow and mature rapidly, they were not wrong. From this small workshop spawned the successful one on Intelligent Virtual Agents, held in Manchester in 1999. This volume comprises the proceedings of the much larger third workshop held in Madrid, September 10 11, 2001, which successfully achieved the aim of taking a more international focus, bringing together researchers from all over the world. We received 35 submissions from 18 different countries in America, Asia, and Africa. The 16 papers presented at the conference and published here show the high quality of the work that is currently being done in this field. In addition, five contributions were selected as short papers, which were presented as posters at the workshop. This proceedings volume also includes the two prestigious papers presented at the workshop by our keynote speakers: Daniel Thalmann, Professor at the Swiss Federal Institute of Technology (EPFL) in Lausanne and Director of the Computer Graphics Lab., who talked about The Foundations to Build a Virtual Human Society. Jeff Rickel, Project Leader at the Information Sciences Institute and a Research Assistant Professor in the Department of Computer Science at the University of Southern California, who debated about Intelligent Virtual Agents for Education and Training: Opportunities and Challenges.