A mechatronic exercise system, e.g., for rehabilitation, having instrumented handle and pedal systems and, preferably, an interactive virtual environment is disclosed. Alternatively, the instrumented handle and pedal systems are part of a virtual reality augmenting kit that can convert most types of exercise equipment, such as a stationary or exercise bicycle, ergometer, rowing machine or the like, into full virtual reality (VR) smart systems. In another embodiment, the instrumented handle and pedal systems can each be used separately with other types of devices. In a preferred embodiment, components embedded with sensors are implemented, e.g., on a stationary, exercise bicycle to monitor physiological and biomechanical parameters of the user. Signal data from the sensing components is used to immerse the user in a VR simulation so as to provide the user with visual, auditory, and haptic feedback to the user's performance.