Virtual Reality (VR) technologies have long been used in social psychology experiments and in psychotherapeutic treatments, because they can flexibly generate realistic scenes which are not easily to create in the physical world. Although conventional computer-graphic based VR can induce certain feelings of immersiveness, most people still know and perceive these VR environments as essentially ‘unreal’ or ‘artificial’. We are working with an innovative Substitutional Reality (SR) system which is able to provide a step-change in experienced reality, using a unique combination of panoramic video/audio and head tracking VR. Using our methods, fully realistic and live experiences can be reproduced in lab. This system has many possibilities for both experiment and therapy; for instance we are currently examining what it takes for a person to experience their environment as ‘real’, which may help us understand what happens when this process goes wrong, as in psychiatric conditions like depersonalization/derealization.