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Social isolation and sedentary behaviour are common in residential aged care facilities (also known as nursing homes or long-term care). Use of new technologies such as virtual and augmented reality are currently under investigation for their potential to provide exciting and engaging activities for older people in residential aged care facilities. However, there is limited evidence on whether these technologies can promote physical activity in a small group setting for people with cognitive impairment. Using mixed methods, we examined the use of a virtual cycling experience in a sample of 10 participants with cognitive impairment living in residential aged care facilities. In a randomised crossover design, participants engaged in a 25-minute, self-paced, facilitated seated virtual cycling experience and a time-matched seated physical activity session in groups of five. All participants completed a brief pre- and post-intervention mood questionnaire. Video analysis was used for both conditions to compare levels of environmental stimulation, apathy and engagement using both the Person–Environment Apathy Rating Scale and the Engagement of a Person with Dementia Scale. A thematic analysis of semi-structured interviews following the virtual cycling experience was also performed. No differences were observed between conditions for all outcomes except for environmental stimulation, where there was a lower response in the intervention than the control condition ( p = 0.032). This was primarily driven by lower scores for the virtual cycling experience than control in physical accessibility ( p = 0.012). Participants reported the virtual cycling experience to be immersive and challenging and reminisced about cycling earlier in life. The activity manager observed that the virtual cycling experience was an overall positive experience and emphasised benefits of safety screening and preparation prior to the activities. The findings of this study support the use of the virtual cycling experience as an immersive and engaging alternative to usual activities, which might encourage higher levels of physical activity in residential aged care facilities.