Activity theory is based on theconcept of tools mediating between subjects andobjects. In this theory, an individual''screative interaction with his or hersurroundings can result in the production oftools. When an individual''s mental processesare exteriorized in the form of tools – termedobjectification – they become more accessibleto other people and are therefore useful forsocial interaction. This paper shows how ourunderstanding of activity theory has shaped ourdesign philosophy for groupware and how we haveapplied it. Our design philosophy and practiceis exemplified by a description of the BUILD-ITsystem. This is an Augmented Reality system wedeveloped to enhance group work; it is a kindof graspable groupware which supportscooperative planning. The system allows a groupof people, co-located around a table, tointeract, by means of physical bricks, withmodels in a virtual three-dimensional (3D)setting. Guided by task analysis, a set ofspecific tools for different 3D planning andconfiguration tasks was implemented as part ofthis system. We investigate both physical andvirtual tools. These tools allow users toadjust model height, viewpoint, and scale ofthe virtual setting. Finally, our designpractice is summarized in a set of designguidelines. Based on these guidelines, wereflect on our own design practice and theusefulness of activity theory for design.