Virtual reality (VR) has emerged as a safe and non-invasive technology for the assessment of psychotic symptoms, social and cognitive impairments, and psychosocial intervention in improving outcomes in psychosis. This study systematically reviewed the current state of evidence in applying semi- and fully immersive VR for assessing and treating patients with psychosis. A systematic review was conducted adhering to the PRISMA statement and was conducted in Embase, PsycINFO, and PubMed databases for articles published between January 2013 and April 2022, which identified 28 eligible studies, including 12 for assessment and 16 for intervention. In the assessment studies, not all VR tasks could distinguish the differences between patients and healthy controls regarding their physiological responses, paranoid ideation, and certain aspects of cognitive functioning such as memory bias on the object tasks. Comparatively, VR-based interventions are more promising, especially for improving cognitive impairments, social skills, agoraphobic avoidance, negative and positive affective states, auditory verbal hallucination, paranoid ideation and persecutory delusions, and other psychiatric symptoms in patients. We conclude that more rigorous studies are needed to confirm treatment effectiveness and to understand the underlying mechanism of VR-based intervention for psychotic disorders. Future studies should also improve the reliability and validity of VR-based assessments for psychotic disorders.