diff --git a/interface/src/avatar/SkeletonModel.cpp b/interface/src/avatar/SkeletonModel.cpp
index 5aab7813eb..02ffb903a1 100644
--- a/interface/src/avatar/SkeletonModel.cpp
+++ b/interface/src/avatar/SkeletonModel.cpp
@@ -164,16 +164,30 @@ void SkeletonModel::updateRig(float deltaTime, glm::mat4 parentTransform) {
 
         Rig::HandParameters handParams;
 
+        // compute interp factor between in body and out of body hand positions.
+        const float MIN_OUT_OF_BODY_DISTANCE = TRUNCATE_IK_CAPSULE_RADIUS - 0.1f;
+        const float MAX_OUT_OF_BODY_DISTANCE = TRUNCATE_IK_CAPSULE_RADIUS + 0.1f;
+        glm::vec3 capsuleStart = Vectors::UNIT_Y * (TRUNCATE_IK_CAPSULE_LENGTH / 2.0f);
+        glm::vec3 capsuleEnd = -Vectors::UNIT_Y * (TRUNCATE_IK_CAPSULE_LENGTH / 2.0f);
+        float outOfBodyAlpha = distanceFromCapsule(hmdPositionInRigSpace, capsuleStart, capsuleEnd, TRUNCATE_IK_CAPSULE_RADIUS);
+        outOfBodyAlpha = (glm::clamp(outOfBodyAlpha, MIN_OUT_OF_BODY_DISTANCE, MAX_OUT_OF_BODY_DISTANCE) - MIN_OUT_OF_BODY_DISTANCE) /
+            (MAX_OUT_OF_BODY_DISTANCE - MIN_OUT_OF_BODY_DISTANCE);
+
         auto leftPose = myAvatar->getLeftHandControllerPoseInAvatarFrame();
         if (leftPose.isValid()) {
             handParams.isLeftEnabled = true;
             handParams.leftPosition = Quaternions::Y_180 * leftPose.getTranslation();
             handParams.leftOrientation = Quaternions::Y_180 * leftPose.getRotation();
 
-            // truncate hand target
-            if (myAvatar->isOutOfBody() && qApp->isHMDMode()) {
+            // adjust hand position if head is out of body.
+            if (qApp->isHMDMode()) {
+
+                // compute the out of body hand position.
                 glm::vec3 offset = handParams.leftPosition - hmdPositionInRigSpace;
-                handParams.leftPosition = truncatedHMDPositionInRigSpace + offset;
+                glm::vec3 outOfBodyLeftPosition = truncatedHMDPositionInRigSpace + offset;
+
+                // interpolate between in body and out of body hand position.
+                handParams.leftPosition = lerp(handParams.leftPosition, outOfBodyLeftPosition, outOfBodyAlpha);
             }
         } else {
             handParams.isLeftEnabled = false;
@@ -185,10 +199,15 @@ void SkeletonModel::updateRig(float deltaTime, glm::mat4 parentTransform) {
             handParams.rightPosition = Quaternions::Y_180 * rightPose.getTranslation();
             handParams.rightOrientation = Quaternions::Y_180 * rightPose.getRotation();
 
-            // truncate hand target
-            if (myAvatar->isOutOfBody() && qApp->isHMDMode()) {
+            // adjust hand position if head is out of body.
+            if (qApp->isHMDMode()) {
+
+                // compute the out of body hand position.
                 glm::vec3 offset = handParams.rightPosition - hmdPositionInRigSpace;
-                handParams.rightPosition = truncatedHMDPositionInRigSpace + offset;
+                glm::vec3 outOfBodyRightPosition = truncatedHMDPositionInRigSpace + offset;
+
+                // interpolate between in body and out of body hand position.
+                handParams.rightPosition = lerp(handParams.rightPosition, outOfBodyRightPosition, outOfBodyAlpha);
             }
         } else {
             handParams.isRightEnabled = false;
diff --git a/libraries/shared/src/GeometryUtil.cpp b/libraries/shared/src/GeometryUtil.cpp
index 9cf668f733..91623f1e83 100644
--- a/libraries/shared/src/GeometryUtil.cpp
+++ b/libraries/shared/src/GeometryUtil.cpp
@@ -596,6 +596,10 @@ float distanceFromLineSegment(const glm::vec3& point, const glm::vec3& segmentSt
     return glm::length(point - nearestPointOnLineSegment(point, segmentStart, segmentEnd));
 }
 
+float distanceFromCapsule(const glm::vec3& point, const glm::vec3& segmentStart, const glm::vec3& segmentEnd, float capsuleRadius) {
+    return distanceFromLineSegment(point, segmentStart, segmentEnd) - capsuleRadius;
+}
+
 bool pointIsInsideCapsule(const glm::vec3& point, const glm::vec3& capsuleStart, const glm::vec3& capsuleEnd, float capsuleRadius) {
     return distanceFromLineSegment(point, capsuleStart, capsuleEnd) < capsuleRadius;
 }
@@ -604,7 +608,7 @@ glm::vec3 projectPointOntoCapsule(const glm::vec3& point, const glm::vec3& capsu
     glm::vec3 nearestPoint = nearestPointOnLineSegment(point, capsuleStart, capsuleEnd);
     glm::vec3 d = point - nearestPoint;
     float dLen = glm::length(d);
-    if (dLen > EPSILON) {
+    if (dLen < EPSILON) {
         return nearestPoint;  // TODO: maybe we should pick a point actually on the surface...
     } else {
         return nearestPoint + d * (capsuleRadius / dLen);
diff --git a/libraries/shared/src/GeometryUtil.h b/libraries/shared/src/GeometryUtil.h
index 05ca415cac..47f069931d 100644
--- a/libraries/shared/src/GeometryUtil.h
+++ b/libraries/shared/src/GeometryUtil.h
@@ -162,6 +162,7 @@ private:
 
 glm::vec3 nearestPointOnLineSegment(const glm::vec3& point, const glm::vec3& segmentStart, const glm::vec3& segmentEnd);
 float distanceFromLineSegment(const glm::vec3& point, const glm::vec3& segmentStart, const glm::vec3& segmentEnd);
+float distanceFromCapsule(const glm::vec3& point, const glm::vec3& segmentStart, const glm::vec3& segmentEnd, float capsuleRadius);
 bool pointIsInsideCapsule(const glm::vec3& point, const glm::vec3& capsuleStart, const glm::vec3& capsuleEnd, float capsuleRadius);
 glm::vec3 projectPointOntoCapsule(const glm::vec3& point, const glm::vec3& capsuleStart, const glm::vec3& capsuleEnd, float capsuleRadius);