With continuous pressure for reducing vehicle development time and cost, without compromising on system reliability, it is imperative to move from Road to Lab to Model (RLM) based development. Every OEM is currently using virtual environment to complete functional checks of systems during development. The method of developing control functions and calibration in virtual environment brings repeatability and reproducibility which typically is challenging in real world testing. This process is cost effective and optimizes the time for development and brings high level of system maturity before testing it in the vehicle.This paper focuses on defining a front-loading approach for setting up of virtual test environment. Development of virtual test environment and its validation with respect to real vehicle data will be discussed, with focus on vehicle plant model and driver model. This paper will also focus on application of virtual test environment for various model based development activities, with a case study for control function development and calibration.