Regarding the lack of interactivity for Virtual Knee Arthroscopic Surgery, which leads less immersion in simulated surgery, a new advanced interactive device in Virtual Knee Arthroscopic Surgery based on displacement sensor and Data acquisition card was developed. Based on study of degree of freedom on Knee Arthroscopic Surgery, a new interactive device on simulating real surgery was proposed. This device simplifies true operation for four degrees of freedom. Each displacement sensor captures information from one degree of freedom, then sends the information to the data acquisition card to carry out analysis and treatment for the purpose of synchronization on the computer, then realize realistic simulation of surgical procedures. The creative design of the interactive device makes it possible to flexibly adjust the location and angle of simulated scalpel and endoscope according to different operator and reach the requirement of immersion of virtual reality.