Drug craving has purportedly been linked to relapse and to substance use. For over two decades, cue reactivity has been a viable method to assess craving and physiological reactions to drug stimuli. However, traditional cue reactivity has faced the following limitations: austere situations or stimuli, lack of complex cues, lack of standardization, and limited generalization outside of the lab setting. In order to improve cue methodologies, a virtual reality (VR) nicotine cue reactivity assessment system (VR-NCRAS) was developed and tested in a controlled experimental trial. Ten nicotine dependent smokers were exposed to VR smoking cues and VR neutral cues in a standardized, timed, computer controlled experiment. Subjective craving and physiological responses were recorded and compared across VR-NCRAS stimuli. Subjective cigarette craving increased significantly and corresponding physiological reactivity was observed in response to VR smoking cues. VR neutral cues did not result in subjective or physiological changes consistent with craving. Implications of these findings on substance abuse research and treatment are discussed.