An extensible simulation system and graphical programming method enable a simulation user to program the behaviors of objects in a simulation while requiring no knowledge of computer programming concepts or languages. The simulation user defines each object's behaviors by creating Graphical Rewrite Rules through programming by demonstration. The user can selectively abstract a given Graphical Rewrite Rule (GRR) such that it applies to states within the simulation according to hierarchical object types and object property conditions. The extensible simulation system comprises a Central Processing Unit (CPU), an input device, an output device, an external storage device, predetermined amounts of Random Access Memory (RAM) and Read-Only Memory (ROM), and an extensible simulator. The extensible simulator comprises an object source, a simulation viewer, a GRR editor, an action recorder, an abstractor, a drawing editor, an object property editor, an object rule viewer, a subroutine editor, and a simulation execution controller. Each element of the system has an input and an output coupled to a common system bus. Preferably, each element of the extensible simulator is a computer program step sequence stored in RAM. The graphical programming method comprises the steps of: selecting an object for which a GRR is to be defined; establishing a simulation context corresponding to the GRR; defining for the GRR a set of actions to be performed by or upon one or more objects within the simulation context, each action defined through programming by demonstration; automatically recording a computer program step sequence for each action defined; and allowing the GRR to be abstracted.