The surge in student engagement in online learning during the COVID-19 pandemic has highlighted opportunities and challenges for higher education outside traditional classrooms. While online modalities offer flexibility, they often lack crucial elements for student engagement and hands-on learning. Immersive virtual reality (VR) aims to address this by digitally recreating physical learning environments through interactive 3D simulations. However, the evidence of VR's educational impact is limited. This study systematically reviews the effects of VR-enhanced online courses on cognitive and affective learning outcomes and student engagement among undergraduate and postgraduate learners compared to traditional online instruction. Seven academic journals and electronic literature sources were analyzed for experimental and quasi-experimental studies spanning from September 2013 to September 2023. Twenty studies involving 2,651 participants across disciplines, including health sciences, engineering, and teacher education, were included. Meta-analyses showed that VR significantly improved retention/recall test scores (SMD = 0.46, 95% CI 0.13 to 0.79, p = 0.006) and course assessments (SMD = 0.39, 95% CI 0.09 to 0.68, p = 0.01), indicating cognitive learning benefits. Qualitatively, VR enhanced student presence, collaboration, satisfaction, and motivation, particularly in learning procedural skills/processes. The study acknowledges a moderate risk of bias, mainly in randomization and blinding inadequacies. Despite limitations in study quality and generalizability, results suggest that VR positively impacts online higher education learners across cognitive and affective domains compared to traditional online instruction. While VR shows promise as an engagement tool, its effects may vary by domain. The study advocates for larger experimental studies directly comparing VR with online and blended modalities to further explore its potential in enhancing online learning experiences in higher education, positioning VR as a promising approach for educational improvement.