This paper reports the development of a Naval Virtual Target Range (NVTR) lab prototype. Due to current political and environmental reasons, land-impact, live-fire training opportunities have become increasingly difficult for all branches of the armed forces, especially the U.S. Navy. Consequently, the readiness of the force suffers. The advancement of microelectronics, computer software technology, and modeling and simulation techniques provides a viable solution to this urgent need. A virtual target range can provide almost unlimited training opportunities in any open-ocean environment. In addition to supporting live-fire training, the system also allows for a combination of simulation and/or live-fire training from the lowest single unit to force level exercises. Substantial cost savings from deployment, preparation, and hardware wear and attrition, and high safety standards can be achieved through the use of this virtual target range. A lab version prototype system has been built using commercial-off-the-shelf components. This modular lab prototype can be used as either a stand-alone unit, or as a built-in component for existing naval gun weapon systems for testing and training in a controlled environment. This architecture allows the insertion of different components/subsystems for system upgrade and enhancement. Using a completed system, the Naval Surface Fire Support (NSFS) Team (gunner, forward observer, mission planner(s), fire controller, and commander) can conduct either simulated or live-fire training exercises. This paper reports the concept formulation, early analytic work, algorithm development, computer simulation, component construction, lab tests, and prototyping of a Naval Virtual Target Range lab prototype. The potential applications of this system are also discussed in this paper.