This study aims to investigate whether VR-assisted language learning facilitates EFL learners' vocabulary learning and memory retention. One hundred seventy-seven Chinese undergraduate EFL learners were divided into VRG (VR-assisted instruction group) and CIG (conventional instruction group). Participants in the VRG (n = 75) were provided with immersive VR devices, whereas the others (n = 102) learned in conventional classrooms with instructors. The results illustrate that the spatial design of virtual environments may be related to lexical memory performance. Target words that are placed in positions where they are interacted with more frequently tend to perform better in terms of being memorized. It also suggests that words corresponding to items placed between 60180 cm of the ground are better retained. Subsequent interviews revealed that VR technology helps learners encode information based on spatial location. The VR technology's visual, aural, and textual stimulation also help learners subconsciously remember the vocabulary items.