Background In the field of pain, virtual reality (VR) technology has been increasingly common in the context of procedural pain management. As an interactive technology tool, VR has the potential to be extended beyond acute pain management to chronic pain rehabilitation with a focus on increasing engagement with painful or avoided movements. Objective We outline the development and initial implementation of a VR program in pain rehabilitation intervention to enhance function in youth with chronic pain. Methods We present the development, acceptability, feasibility, and utility of an innovative VR program (Fruity Feet) for pediatric pain rehabilitation to facilitate increased upper and lower extremity engagement. The development team was an interdisciplinary group of pediatric experts, including physical therapists, occupational therapists, pain psychologists, anesthesiologists, pain researchers, and a VR software developer. We used a 4-phase iterative development process that engaged clinicians, parents, and patients via interviews and standardized questionnaires. Results This study included 17 pediatric patients (13 female, 4 male) enrolled in an intensive interdisciplinary pain treatment (IIPT) program, with mean age of 13.24 (range 7-17) years, completing a total of 63 VR sessions. Overall reports of presence were high (mean 28.98; max 40; SD 4.02), suggestive of a high level of immersion. Among those with multisession data (n=8), reports of pain (P<.001), fear (P=.003), avoidance (P=.004), and functional limitations (P=.01) significantly decreased. Qualitative analysis revealed (1) a positive experience with VR (eg, enjoyed VR, would like to utilize the VR program again, felt VR was a helpful tool); (2) feeling distracted from pain while engaged in VR; (3) greater perceived mobility; and (4) fewer clinician-observed pain behaviors during VR. Movement data support the targeted impact of the Fruity Feet compared to other available VR programs. Conclusions The iterative development process yielded a highly engaging and feasible VR program based on qualitative feedback, questionnaires, and movement data. We discuss next steps for the refinement, implementation, and assessment of impact of VR on chronic pain rehabilitation. VR holds great promise as a tool to facilitate therapeutic gains in chronic pain rehabilitation in a manner that is highly reinforcing and fun.