In 1986 Virginia Baxter and partner Keith Gallasch moved from Adelaide to Sydney, writing and producing their stage production Tokyo Now Thriller, which was later adapted for radio as Australia-Japan: A Love Story (1988). The production won several awards including the NSW Premier's Prize for Radio Writing, and the Hi Fi Award for Best Radio Drama. In 1987 she and Gallasch formed collaborative threatrical company, Open City, which was closely associated with Sydney's Performance Space venue.
Between 1986 and 1990 Baxter (along with Gallasch and Open City) also produced four theatrical events, including The Girl with the Stone in Her Shoe (1989) and All That Flows (1990). The latter production, which involved a live national broadcast of the show on 2SER FM, was later staged in New York as part of the New Pathways for Performance Conference. Baxter and Gallasch have since staged a number of music theatre works, some of which featured collaborations with the composers Robert Lloyd and Jonathon Mills - Museum of Accidents (1991) ; Tokyo Two (1992) ; Sense (1992-1993) ; Sum of the Sudden (1993) ; and Nineteen to the Dozen (1995).
Virginia Baxter has also worked extensively with Troupe, the Experimental Art Foundation and Red Shed, among other companies.