Methods and systems for enabling an augmented reality character to maintain and exhibit awareness of an observer are provided. A portable device held by a user is utilized to capture an image stream of a real environment, and generate an augmented reality image stream which includes a virtual character. The augmented reality image stream is displayed on the portable device to the user. As the user maneuvers the portable device, its position and movement are continuously tracked. The virtual character is configured to demonstrate awareness of the user by, for example, adjusting its gaze so as to look in the direction of the portable device.