The application of virtual reality (VR) technology in sport and physical exercise has the potential to improve sport performance, increase adherence and enjoyment of exercise, and provide competitive and non-competitive physical activity interactions among people in geographically diverse areas. There are also challenges to VR applications and these require developers to adopt an evidence-based approach in their work. Accordingly, the use of VR in sport and physical exercise is reviewed. A definition of VR in sport and exercise is proposed from the perspective of the athlete. This approach potentially broadens the ways in which VR can be applied in sport and exercise. Most applications to date have been based on endurance type activities, such as cycling, running, and rowing. In this work, various factors have been shown to influence performance, psychological, and physiological outcomes. VR has shown to improve adherence to exercise, be effective in training race pacing strategies, enhance effort, improve mood and enjoyment, and increase cognitive functioning when compared to control conditions. Elements of the virtual environment, such as the presence of real or virtual others and its immersive properties, can also have additional effects on outcomes. Furthermore, factors related to the individual, such as attentional focus and competitiveness, can influence outcomes. Thus, the use of VR in sport and exercise may be conceptualised as reflecting the independent and interactive effects of the sport or exercise task, the interactions with the virtual environment, and the characteristics of the individual user. Research directions and future applications for VR in sport and exercise are discussed.