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This study examined the impact of adopting self-explanation as a generative learning principle in an engineering learning environment using a desktop Virtual Reality (VR) environment. Using a between-subjects matched-groups design, 38 engineering students learned statics concepts to solve novel engineering problems. Students either used a VR environment or received conventional engineering instruction on paper (control group). In terms of procedural and transfer scores, the VR with self-explanation outperformed the control group (d = 0.72 and 0.95, respectively). VR with self-explanation also outperformed the control group on self-efficacy and situational interest measures and had lower extraneous cognitive load. This study demonstrates that the use of self-explanation cues with VR improves learning outcomes, reduces cognitive load, and promotes affective outcomes.