In the wake of the COVID-19 pandemic and the rise of social justice movements, increased attention has been directed to levels of intergroup tension worldwide. Racial prejudice is one such tension that permeates societies and creates distinct inequalities at all levels of our social ecosystem. Whether these prejudices present explicitly (directly or consciously) or implicitly (unconsciously or automatically), research suggests that manipulating body ownership by embodying an avatar of another race using immersive virtual reality (IVR) can reduce racial bias. Adhering to the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) guidelines, this systematic review encompassed 12 studies that employed IVR and embodiment techniques to investigate racial attitudes. Subsequently, two mini meta-analyses were performed on four and five of these studies, respectively — both of which utilised the Implicit Association Test (IAT) as a metric to gauge these biases. This review demonstrated that IVR allows not only the manipulation of a sense of body ownership but also the investigation of wider social identities. However, despite the novelty of IVR as a tool to help understand and possibly reduce racial bias, our review has identified key limitations in the existing literature. Specifically, we found inconsistencies in the measures employed, as well as demographic characteristics within both the sampled population and the embodiment of avatars. Future studies are needed to address these critical shortcomings by appropriately utilising implicit and explicit measures of racial prejudice, ensuring diverse sample representation, and considering a broader spectrum of embodied social groups.