In this paper, a coaxial virtual cathode oscillator (vircator) is simulated by the particle-in-cell method for the terahertz (THz) band. THz waves have many applications in human life, and many researchers work on related technologies, especially on THz sources like vacuum electronic devices (VEDs). A vircator is a kind of VED that is usually operated at a few GHz, but in this study, a coaxial vircator is proposed as a THz source for the first time. By adding a reflector and center rod to the base coaxial configuration and optimizing the parameters, an output power of about 29 W is achieved at 0.25 THz with the dominant mode of TM01. Working voltage and current are 26 kV and 100 mA, respectively. In addition, to indicate the scalability of the device, two other designs for higher and lower frequencies are simulated. Simplicity is one of the important advantages of the proposed THz coaxial vircator in comparison to other THz sources.