We describe a two-handed immersive and distributed 3D medical system that enables intuitive interaction with multimedia objects and space. The system is applicable to a number of virtual reality and tele-consulting scenarios. Various features were implemented, including measurement tools, interactive segmentation, non-orthogonal planar views, and 3D markup. User studies demonstrated the system's effectiveness in fundamental 3D tasks, showing that iMedic's two-handed interface enables placement and construction of 3D objects 4.5-4.7 times as fast as a mouse interface and 1.3-1.7 times as fast as a one-handed wand interface. In addition, avatar-to-avatar collaboration (two iMedic users in a shared space-one subject and one mentor) was shown to be more effective than face-to-face collaboration (one iMedic user/subject and one live mentor) for three tasks.