Virtual reality therapy may now become a "reality" for young people with mental health conditions including psychotic disorders.

From simulating coffee shops to delivering a presentation, psychologists are trialling technology, combined with other forms of therapy, to immerse patients in challenging situations.

Dr Roos Pot-Kolder is leading a four-year trial into VR therapy with youth mental health organisation Orygen.

"If we avoid things we find scary, we won't get better at them," she told AAP.

"Simulating our worst-case scenario, we might realise maybe it's not the end of the world."

Virtual reality therapy will involve a patient being thrown into a simulation created and controlled by a psychologist.

Though patients will know the experiences aren't real, the body will respond as if it is, Dr Pot-Kolder added.

Being able to create a personalised experience is also one of the key benefits of VR therapy.

"We'll do these scary situations, things that may provoke anxiety or may provoke paranoid thoughts or maybe even hallucinations," Dr Pot-Kolder said.

"What I can do as a therapist, whatever a person needs, I can create this."

A therapist will be able to add virtual people and manipulate their voice via the technology to role play as any person.

Dr Pot-Kolder is most proud of designing VR therapy with input from young people.

"Before we even started to build anything, we did workshops for young people just asking them what would be useful for them," she said.

Orygen will receive a share of the $31 million pool of funds from global charitable foundation Wellcome's Mental Health Award to support their trial.

"One of our goals is not just to see if we can make the therapy better," Dr Pot-Kolder said.

"But at the end, we want to have like a full package ready to go so that everybody in Australia can access it."