Immersive Virtual Reality Technology (IVR) is a visual multi-sensory computer-simulated environment that perceptually surrounds an individual, creating the illusion that one has “stepped inside” and is included in, and interacting with the generated world. Although IVR has been suggested as a tool to enhance learning, existing work has not examined how IVR presentations, compared with other types of storytelling, facilitate or interfere with children’s memory formation. Here, we present data from a study of seventy 6- and 7-year-old children randomly assigned to experience a story in one of three modalities: IVR, video, or a paper-based book. We assessed the children’s story recall and their ability to identify the protagonist’s emotions. Results showed that, overall, children in the IVR condition performed better in the memory-recall task than the children in the video and book conditions. The most pronounced difference in memory performance was between the IVR and book conditions. In the IVR versus video conditions, 6-year-olds performed significantly better in the IVR condition than in the video condition, while 7-year-olds performed similarly in both digital-story conditions. We found no effects of condition on children’s attribution of emotions to the story’s protagonist. We conclude that IVR may enhance children’s ability to learn story content in certain situations.