
The top has patches of smart fabric which can expand and contract and are controlled by Bluetooth commands.
Calls made to the wearer's mobile phone can be made by another person wearing the shirt and when they hug themselves the hug is transmitted to the other person.
"We aim to have the Hug Shirt on the market by the end of 2006," said CuteCircuit co-founder of Francesca Rosella.
"It's been very popular with the press, and with consumers and distributors. I think that people really want to feel connected with each other, so that's what we've tried to make."
CuteCircuit has also developed the Kinetic dress, which changes its colour and pattern at the user's command, and the Mystique dress, which can alter its length.
Intelligent fabrics are already in use across a range of areas. Sports shirts and bras have sensors built in to monitor respiration and heartbeat, and the US Air Force is investigating their use in pilotless drones.