In this paper, a novel algorithm for creating virtual indoor environments is described. First, a panoramic mosaic is generated from a series of photos taken with a camera rotates along a horizontal axis. Then, from the panoramic mosaic image, defining manually the corners in the vertical panoramic mosaic can create a non-fixed viewing point virtual walkthrough system. The side ratio of the virtual walkthrough system can be obtained from the panning angle subsequently. By applying the cylindrical projection technique, the texture for the sides of the virtual walkthrough environment can be projected in a more realistic way. Real images have been used to verify our proposed algorithm with satisfactory results.