Despite a sizable body of literature on virtual organization, little attention has been paid to defining organizational virtuality and identifying organizational factors that influence degree of virtuality of virtual organizations. Based on the virtual organization literature and the knowledge-based view, we develop a working definition of organizational virtuality by conducting a review on the existing definitions of virtual organization, and identify knowledge-related organizational factors that influence organizational virtuality. More specifically, we propose that 1) an organization’s need for knowledge exchange and ability to engage in knowledge exchange jointly determine the level of organizational virtuality that exists in the firm; 2) The higher the need for and ability to engage in knowledge exchange, the higher the level of organizational virtuality of the firm. The contribution the study makes to the academia and the practitioners are also discussed.