Although many linguistic and psychological studies have been made on verbal irony, they still cannot distinguish ironic utterances from nonironic ones completely. This paper argues that irony is distinguished from nonirony in accordance with both the ironic environment condition (i.e., irony presupposes a situational setting consisting of the speaker's expectation, incongruity between the expectation and the reality, and the speaker's negative attitude) and the implicit display condition (i.e., irony satisfies at least two of the three features: allusion, pragmatic insincerity and indirect cues). This paper then shows that the argument is empirically supported, especially that ironic environment is a crucial distinctive feature of irony while implicit display suggests a high possibility of irony. It also suggests an interpretation process of irony consistent with these findings.