Peg-in-Hole methods, like the Nine Hole Peg-Board Test (NHPT) and the Perdue board are widely employed for the functional assessment and therapy of the upper limbs of people with Multiple Sclerosis (MS). Such passive devices have been successfully used for many years, however, recent developments and capabilities of haptic interfaces, call for the development of Virtual-Reality versions of these methods. This paper presents the design and development of such a VR based NHPT with kinesthetic feedback that is achieved by means of a 6DOF Haptic Interface The physical and mathematical modeling, stability analysis, and numerical implementation are outlined. In addition, kinetic and kinematic tests' procedures and results are presented and discussed. Our investigation showed that in contrast to the traditional NHPT, the computer simulated exercise offers the ability of sampling and analysis of kinematic and dynamic data that can allow for a more quantitative and objective assessment of the user. The system presented, will be the basis for further development and investigation of rehabilitation methods for people with neuro-disabilities.