The prevalence of dementia is increasing due to a longer life expectancy and an ageing population. Cognitive impairment affects patients’ daily lives and places a financial and healthcare burden on them and their families. Reminiscence therapy (RT) is a non-pharmacological approach that has been found to enhance the quality of life for older adults with or without dementia. There is an urgent need for more functional and effective treatments, such as virtual reality (VR), which are becoming increasingly popular. VR in RT is a relatively new field, and this paper proposes a conceptual model for developing proof-of-concept virtual reality-based reminiscence therapy (VR-RT) for people with dementia, based on the 4Is: immersion, interaction, imagination, and impression. This model is intended to offer an alternative therapeutic experience for older adults with dementia. This paper demonstrates VR-RT in accordance with the results from the proposed 4Is model, to depict different periods of the olden days of scenes, such as restoring the historical objects and appearance of the citizens. The proposed VR-RT is then evaluated with the occupational therapists (OTs) through pilot testing. The findings reveal that VR-RT based on the proposed model may elicit a positive attitude and motivation in older adults with dementia. The proposed 4Is model serves to offer essential features for VR development, followed by a survey to identify suitable reminiscence materials and themes tailored to older adults with dementia. A pilot test with OTs revealed that VR-RT has the potential to improve the conditions of people with dementia. The research contributes valuable insights and lays the groundwork for future development of VR-RT for people with dementia.