With the rapid development of virtual world, especially the ongoing integration between virtual reality and daily life, the impacts of virtual environment on users’ real life have gained great attention by current researchers. Users usually participate in online social interaction via virtual avatars. Avatars, as one kind of self-presentation in virtual environment, could affect users’ perceptions, attitudes, and behaviors in consciously or unconsciously on avatar-based online social interaction, which is known as the Proteus effect. In recent years, researchers have conducted a series of studies on Proteus effect. Existing researches on Proteus effect were mainly focused on the following four topics. At first, researchers clarified the concept of Proteus effect by distinguishing Proteus effect from behavioral confirmation and role playing. Secondly, researchers have summarized the influential factors of Proteus effect, including avatar’s valence and clue types, levels of individuation, and gender. Thirdly, researchers systematically discussed the effects of Proteus effect on users at both individual and group level, studies indicated that Proteus effect not only impacts the users’ information processing and attitude, but also influences users’ online behaviors, especially for aggressive and social behaviors. Finally, the potential occurrence mechanisms of the Proteus effect were explored based on the Self-perception Theory, and Deindividuation Theory. In summary, the previous researches provided a starting point for exploring psychological phenomena inside the virtual world. Future researches could focus on developing new research methods and paradigms, broadening research samples, and generalizing the current researches to cross cultural settings.