This paper seeks to add to the nascent research literature on virtual teams and virtual team leadership by investigating the issues facing virtual team leaders as they implement and lead virtual teams. In particular, the way in which leaders develop relationships with their virtual team members is explored. A research framework involving action learning was instituted, with data collection and analysis based on grounded theory approaches. In all, seven virtual team leaders from a variety of New Zealand organizations took part in the study. The data showed very clearly that the leaders considered it essential to build some level of personal relationship with their virtual team members before commencing a virtual working relationship. A unifying framework of three interrelated theoretical steps, which illustrates how a virtual leader builds relationships with virtual team members, is introduced. These three steps are assessing conditions, targeting level of relationship, and creating strategies. This study is the first to identify the steps a virtual team leader undertakes when building relationships with virtual team members. The implications for virtual team practice and research are discussed.