Virtual reality (VR) has been shown to reduce pain, however outcome parameters of previous studies have primarily been of a subjective nature and susceptible to bias. This study investigated the effect of VR on cortical processing of evoked potentials (EPs) and subjectively reported pain. Additionally, we explored whether subjects' demographic and personal characteristics modulated the effect of VR analgesia. Three VR conditions were compared in a randomized cross-over study of 30 healthy volunteers: Passive VR (i.e. no interaction possible with the virtual world), active VR (interactive virtual environment) and no VR (black screen). Subjects received noxious electrical stimuli at random intervals during all conditions. EPs, recorded at Cz, were extracted time locked to stimuli. Pain scores were reported after each condition. Active VR significantly decreased pain scores and amplitudes of N1 and P3. Passive VR had no analgesic effect. Age was significantly correlated to pain scores, with older subjects demonstrating larger effects of VR. Gender, game experience, and susceptibility for immersion, did not influence VR analgesia. Active VR decreases pre-perceptual and perceptual brain activity following painful electrical stimuli, corresponding with reduced pain experience. VR has potential to serve as a non-pharmacologic treatment for pain, particularly in elderly patients.