With the rapid development of the virtual world, Collaborative Virtual Environments (CVEs) allow geographically separated individuals to interact via networking technology, which has become an important mode of interaction. Human interaction in the virtual world is different from face-to-face (FtF) interactions. For people to participate in virtual interactions, they have to rely on the help of virtual self-presentation. Avatars are one main kind of self-presentation in virtual environments with people participating in virtual social interaction via virtual avatars. Avatars can affect people’s perceptions, attitudes, and behaviors consciously or unconsciously on avatar-based online social interaction, which is known as the Proteus effect. The study included three experiments. The participants in the research were “high-shy” undergraduates and “low-shy” undergraduates. The College Students Shyness Scale was used to classify participants into “high” and “low” groups. The study created a new paradigm of “virtual scenario simulation” to further understand the Proteus effect and investigate the impact of avatars on social behavior in different social interaction contexts. The first experiment investigated the impact of avatars on the level of social participation in participating- social-interaction contexts. The experiment involved a 2 Attractiveness of the avatar (high/low) × 2 Level of shyness (high/low) two-factor between-subject design. Participants were randomly assigned to have an avatar with an attractive or unattractive appearance of his or her own gender. The second experiment extended the work beyond participating-interaction context to maintaining-interaction context. We also employed a two-factor between-subject design, 2 Attractiveness of avatar (high/low) × 2 Level of shyness (high/low) for this experiment. The third experiment involved one more two-factor between-subject design, 2 Value of avatar (negative /positive) × 2 Level of shyness (high/low), for this experiment. The experiment examined whether the difference between high-shy and low-shy individuals was elicit in cognitive aspect. The findings of the present study ultimately showed that: (1) Some factors affected the occurrence of the Proteus effect in virtual environment, including contextual factors (different social interaction contexts) as well as individual factors (the level of shyness). (2) The Proteus effects were moderated by the contextual factor. Avatars manifested different effects in different contexts, it showed the main effect in the participating- interaction context and showed an interaction effect in the maintaining-interaction context. (3) In the maintaining- interaction context, the Proteus effects were moderated by the level of shyness. The social performances of high-shy individuals were significantly affected by the avatar cues while that of low-shy individuals were not. (4) The difference between high-shy and low-shy individuals was elicited by the cognitive level.