The Cybernation School on the outskirts of Tokyo whose motto is 'Your smartphone is your classroom!' will allow dropouts to complete their secondary education from the comfort of their bedrooms.
The school, to be launched in April next year, has so far received more than 1,000 inquiries for its 300 places.
The school will allow students to create avatars to attend virtual classes, make 'friends' with classmates' avatars and have homework marked by teachers' avatars.
Classes will consist of pre-recorded lectures streamed online and pupils will collect 'study points' that enable them to graduate after three years, 'The Times' reported.
In Japan, nearly 120,000 pupils refused to attend school for psychological reasons last year. Many of these are hikikomori, or recluses who struggle to form human relationships and retreat to an anonymous virtual reality online.
According to government statistics there were 700,000 hikikomori in Japan in 2010.