The realistic interaction with physical phenomena is a crucial aspect of human-computer interaction (HCI) in virtual reality (VR). However, the real-time performance of physical simulation, interactive computation, and rendering is the bottleneck of physics-based VR HCI. To address these challenges, we propose a novel physics-oriented framework for multi-material objects and free-hand interaction, termed PhyVR. This framework enables users to interact with diverse virtual phenomena dynamically. At the algorithm level, we develop a unified particle system to describe both the virtual multi-materials and the user’s avatar for the efficiency issue, optimize collision detection, and accelerate the HCI algorithms with a variable fine-coarse particle sampling scheme. At the rendering level, we introduce a hybrid particle-grid anisotropic algorithm for surface reconstruction, enabling real-time and visually convincing fluid rendering. Comprehensive experiments and user studies demonstrate that our framework effectively captures various physical interaction phenomena, providing an enhanced user experience and paving the way for expanding VR-related HCI applications.