In or automotive engineering education is introduced. Main objective of the system is teaching disassemble/assemble procedure of automatic transmission of a vehicle to students, who study automotive engineering. System includes vehicle transmission, set of tools and mechanical facilities, two video cameras, computer with developed software, HMD glasses and two LCD screens. Developed software gives instructions on assembling and disassembling processes of real vehicle transmission with the help of augmenting virtual reality objects on the video stream. Overlaying of 3D instructions on the technological workspace can be used as an interactive educational material. In disassembling process, mechanical parts which should be disassembled are augmented on video stream from video cameras. Same is done for assembling process. Animation and other visual effects are applied for better indication of the current assembling/disassembling instruction. During learning and training, student can see what parts of vehicle transmission and in which order should be assembled or disassembled. Required tools and technological operations are displayed to a student with the help of augmented reality, as well. As a result, the system guides a student step-by-step through an assembly/disassembly sequence. During educational process a student has an opportunity to return back to any previous instruction if it is necessary. Developed augmented reality system makes educational process more interesting and intuitive. Using of augmented reality system for engineering education in automotive technology makes learning process easier and financially more effective.