The current approach to connected and autonomous driving function development and evaluation uses model-in-the-loop simulation, hardware-in-the-loop simulation, and limited proving ground work followed by public road deployment of beta version of software and technology. The rest of the road users are involuntarily forced into taking part in the development and evaluation of these connected and autonomous driving functions in this approach. This is an unsafe, costly and inefficient method. Motivated by these shortcomings, this paper introduces the Vehicle-in-Virtual-Environment (VVE) method of safe, efficient and low cost connected and autonomous driving function development, evaluation and demonstration. The VVE method is compared to the existing state-of-the-art. Its basic implementation for a path following task is used to explain the method where the actual autonomous vehicle operates in a large empty area with its sensor feeds being replaced by realistic sensor feeds corresponding to its location and pose in the virtual environment. It is possible to easily change the development virtual environment and inject rare and difficult events which can be tested very safely. Vehicle-to-Pedestrian (V2P) communication based pedestrian safety is chosen as the application use case for VVE and corresponding experimental results are presented and discussed. It is noted that actual pedestrians and other vulnerable road users can be used very safely in this approach.