Mentored online intercultural interaction offers foreign language learners the opportunity to develop different competences, including intercultural, linguistic, and digital competence (O’Dowd, 2021). Such virtual exchange (VE) projects typically involve computer-mediated communication via, for example, Zoom. However, the use of high-immersion virtual reality (VR) for synchronous online collaboration in VE projects has received little attention. This study investigated the effect of VR on students’ levels of presence and engagement, on students’ communication and on students’ views on using VR for intercultural encounters compared to traditional videoconferencing tools. Twenty-seven university students from the Netherlands and Germany utilised VR to carry out intercultural learning tasks using English as a lingua franca during a four-week implementation period. Participants responded to pre- and post-intervention questionnaires, completed reflection journals, audio- or video-recorded their VR meetings and participated in interviews. Results showed that the levels of presence and engagement and preferences of social VR compared to videoconferencing for intercultural encounters depended on students individually. A VR immersion experience and comfortability scale was created based on the data which showed mixed experiences. VR influenced participants’ interactions, topics of conversation and communication strategies when they explored their spaces together. The results showed that students’ attitudes towards VR and their subjective experience of VR seem to play an important role in the VE-VR setting. VR provided a safe space for many participants. Positive attitudes towards communicating in the VR environment are highly correlated with positive attitudes towards meeting students from other countries in VR. Implications for language education are provided.