Background: Reminiscence therapy (RT) is a commonly used nonpharmaceutical treatment for cognitive impairment. Artifacts or conversations are used in RT to recall individuals’ memories and past experiences. Virtual reality (VR) has increasingly been used as an assistive technology during RT. However, the effects of VR-based RT (VR-RT) methods remain unclear, and insights into the related benefits and challenges are urgently needed. Objective: The study aims to systematically review the effects of VR-RTs for older adults with cognitive impairment. Methods: Seven databases (MEDLINE, Academic Search Premier, CINAHL, Web of Science, PubMed, the Cochrane Central Register of Controlled Trials, and ScienceDirect) were searched to identify relevant articles published from inception to August 10, 2023. Peer-reviewed publications that assessed the effect of VR-RTs (ie, using virtual clues to evoke participants’ memories or past experiences) on cognitive-related outcomes were included. Two independent researchers conducted the literature search, review, and data extraction processes. A narrative synthesis approach was used to analyze the extracted data. Results: Of the 537 identified articles, 22 were ultimately included in the data analysis. The results revealed that VR-RTs could maintain cognitive status (4/4, 100%) and reduce anxiety (2/2, 100%) in older adults with cognitive impairment. Nevertheless, one study found a cognitive improvement after VR-RTs, whereas cognitive degradation was observed at a 3- to 6-month follow-up measure. Around 88% (7/8) of the included studies indicated that VR-RTs improved memory; however, the evidence regarding the beneficial effects of VR-RTs was limited in improving quality of life (1/4, 25%) and reducing apathy (0/2, 0%) and depression (1/3, 33%). The results indicated that VR-RTs are safe, engaging, acceptable, and satisfying for older adults with cognitive impairment. In VR scenarios, personalized stimulus materials related to the users’ youth experiences were more effective for treating cognitive impairment than other stimulus materials. Conclusions: The results of this systematic review demonstrate the potential benefits of VR-RT for older adults with cognitive impairment, especially in improving emotion and memory and maintaining cognitive status. VR-RT is also safe and enjoyable for older adults. However, due to the trial heterogeneity of included studies, we can only provide qualitative results instead of performing meta-analysis to quantify the effect size of VR-RTs. Thus, more randomized controlled trials are required to examine the designs and effects of VR-RTs for groups of older adults with specific needs.