Background and Purpose: Few effective treatments improve upper extremity (UE) function after stroke. Immersive Virtual Reality (imVR) is a novel and promising strategy for stroke UE recovery. However, research on immersive VR-based UE rehabilitation has been minimal. Here we present a randomized controlled trial to assess the effectiveness of imVR-based UE rehabilitation in patients with subacute stroke and explore the underlying brain network related to imVR-based rehabilitation. Methods: A single-blinded, randomized controlled trial was performed with 40 subjects randomly assigned to either the imVR or the control group (1:1 allocation), each receiving rehabilitation 5 times per week for 3 weeks. Subjects in the imVR group received both immersive VR and conventional rehabilitation, while those in the control group received conventional rehabilitation only. The Fugl-Meyer assessment's upper extremity subscale (FMA-UE) and the Barthel Index (BI) were our primary and secondary outcomes, respectively. Subjects received assessments and MRI scans at each of the following three time points: immediately after randomization (baseline, Week 0), immediately following conclusion of the randomized rehabilitation program (post-intervention, Week 3), and follow-up 12 weeks after completing the rehabilitation program (follow-up, Week 15). Brain functional connectivity (FC) and a parameter derived from it, degree, were used to assess the performance of immersive VR-based rehabilitation and to relate the change of brain activity to motor recovery. Results: Both intention-to-treat (ITT) and per-protocol (PP) analyses demonstrated the effectiveness of imVR-based UE rehabilitation on subacute stroke. The FMA-UE score was significantly greater in the imVR group compared with the control group at the post-intervention (mean difference: 9.11, 95% CI (1.57-16.64); p = 0.019 (ITT); 12.46, 95% CI (4.56 -20.36); p = 0.003 (PP)), and at the follow-up (mean difference:11.47, p = 0.020 (ITT); 18.85, 95% CI (6.01-31.69); p = 0.006 (PP)). The results were consistent for BI scores at the post-intervention (mean difference: 8.28, 95% CI (0.082-16.48); p = 0.048 (ITT); 9.77, 95% CI (0.58-18.95); p = 0.038 (PP)), and at the follow-up (mean difference: 4.81, 95% CI (0.85-8.77); p = 0.019 (ITT); 6.69, 95% CI (0.54-12.84); p = 0.034 for (PP)). Moreover, brain functional connectivity analysis found that the motor function improvements are significantly associated with a change in brain functional connectivity in ipsilesional premotor cortex and ipsilesional dorsolateral prefrontal cortex immediately following the intervention and in ipsilesional visual region and ipsilesional middle frontal gyrus after the 12-week follow-up. In addition, a significant increase in the motor recovery rate of the imVR group was observed between the baseline and post-intervention time points (p = 0.002). Conclusions: The imVR-based rehabilitation is an effective rehabilitation tool that can improve the recovery of UE functional capabilities of subacute stroke patients when added to standard care. These improvements are associated with distinctive brain reorganizations at two post-stroke timepoints. The study results will benefit future patients with stroke and may provide a new and better method of stroke rehabilitation.