An apparatus and method for performing video telephony by a mobile terminal are provided. The method includes establishing a video telephony connection with another mobile terminal, capturing a first image with a first camera, capturing a second image with a second camera, transmitting image information of at least one of the first image and the second image to a server, determining if image data is received from the server, if the image data is received, creating a panoramic image with the image data and at least one of the first image and the second image, and transmitting the panoramic image to the other mobile terminal.