The demand for high quality care is in contrast to reduced training time for residents to develop arthroscopic skills. Thereto, simulators are introduced to train skills away from the operating room. In our clinic, a physical simulation environment to Practice Arthroscopic Surgical Skills for Perfect Operative Real-life Treatment (PASSPORT) is being developed. The PASSPORT concept consists of maintaining the normal arthroscopic equipment, replacing the human knee joint by a phantom, and integrating registration devices to provide performance feedback. The first prototype of the knee phantom allows inspection, treatment of menisci, irrigation, and limb stressing. PASSPORT was evaluated for face and construct validity. Construct validity was assessed by measuring the performance of two groups with different levels of arthroscopic experience (20 surgeons and 8 residents). Participants performed a navigation task five times on PASSPORT. Task times were recorded. Face validity was assessed by completion of a short questionnaire on the participants’ impressions and comments for improvements. Construct validity was demonstrated as the surgeons (median task time 19.7 s [8.0–37.6]) were more efficient than the residents (55.2 s [27.9–96.6]) in task completion for each repetition (Mann–Whitney U test, P < 0.05). The prototype of the knee phantom sufficiently imitated limb outer appearance (79%), portal resistance (82%), and arthroscopic view (81%). Improvements are required for the stressing device and the material of cruciate ligaments. Our physical simulation environment (PASSPORT) demonstrates its potential to evolve as a training modality. In future, automated performance feedback is aimed for.