Virtual Reality (VR) is a technology which allows users to walk around in, and interact with, three-dimensional computer-generated environments. As the capabilities of these technologies broaden, the interest in application to neuroscience and psychology increases, as exemplified by the UK investing 4 million pounds to enable the delivery of VR psychological therapy in the National Health Service. Our research has designed, developed, and validated a specialised VR environment for research and clinical applications. We have integrated cutting edge VR equipment with precise event-marked psychophysiological recording to investigate VR exposure. We have validated our VR system by comparing objective (e.g. physiological) and subjective measures (e.g. state anxiety, therapeutic alliance) to those obtained in traditional exposure, using a repeated-measures counterbalanced design. This enables us to comment on the opportunities and challenges of applying VR to research and clinical practice within neuroscience and psychology.