In this demonstration we show an Augmented Reality (AR) system we are developing for exposure treatment. AR has great potential for phobia treatment because virtual fear stimuli can be shown in the real world and the client can see their own body and interact naturally with the stimuli. However, advanced natural interactivity has so far not been fully implemented in AR based exposure therapy systems. Our AR exposure treatment system has a better integration of the real environment and the user into the system, and recognizes natural user actions as system input. Using the Microsoft Kinect device, we create a model of the therapy environment and the user's body. This information is used in conjunction with a physics simulation engine to create a virtual spider that reacts to the real environment in a realistic manner. The virtual spider can walk up, around, or behind real objects and can be carried, prodded and occluded by the user. We describe the system and present the iterative development of our framework including an improved gesture library for improved interactivity.