Virtual reality (VR) has become a readily available consumer technology, strengthening its promise as a research tool for health psychology. We identify five key strengths of VR‐based research: data collection, realism, experimental control, adaptability, and mobility (DREAM). We review how these advantages allow researchers to investigate behavioral, psychological, and social processes related to health and well‐being in novel ways, by using VR as both a stimulus and a measurement tool. We also describe challenges facing VR research and potential strategies researchers can use to mitigate them. In addition to reviewing existing research, we hope to inspire researchers to consider ways in which VR might be used in future to augment their own research programs or answer currently impracticable research questions in health psychology.