Virtual reality (VR) environments are increasingly being used by neuroscientists to simulate natural events and social interactions. VR creates interactive, multimodal sensory stimuli that offer unique advantages over other approaches to neuroscientific research and applications. VR's compatibility with imaging technologies such as functional MRI allows researchers to present multimodal stimuli with a high degree of ecological validity and control while recording changes in brain activity. Therapists, too, stand to gain from progress in VR technology, which provides a high degree of control over the therapeutic experience. Here we review the latest advances in VR technology and its applications in neuroscience research.