Given that project-based learning (PjBL) allows for hands-on application in realistic contexts and that immersive virtual reality (iVR) allows learners to interact with multiple modalities of information and immerse in a real-world English environment, this study investigates how incorporating iVR technology into PjBL contexts affects students' oral English skill and engagement. A total of 80 business English majors enrolled in a course named "Hotel English" were assigned randomly to one of four groups: traditional, PjBL, iVR, and PjVR (iVR-assisted PjBL). Students in the PjVR group were to create VR videos to finish the projects while those in the PjBL group participated in a PjBL context in the classroom but without the use of iVR technology. The traditional group students followed the traditional PPP (presentation, practice, and production) instructional procedures in the classroom while the iVR group students also followed the PPP procedures but with the iVR technology to support in practice part. After the intervention, all the students took a post-oral English test and completed a students' engagement questionnaire. The results showed that the oral English skill of the PjVR group students significantly outperformed the other 3 groups and the students' skills of grammar and vocabulary, discourse management, pronunciation, and interactive communication all improved significantly while their behavioral, affective, cognitive, and social engagement also improved a lot. The implications of these findings highlight the importance of immersing language learners in immersive environments for contextualized learning by combining iVR and PjBL.