Sense of presence is an important factor influencing the quality of the virtual reality (VR) experience. However, there is limited understanding of what factors affect presence in virtual environments. This study uses a qualitative methodology, specifically thematic analysis, to investigate factors affecting sense of presence in a VR social environment that has been designed for psychological assessment. After experiencing a virtual bar-room that contained interactions with multiple avatars, participants (n = 76) took part in a semistructured interview. Eight key themes and associated subthemes were identified: emotions about self (anxiety, paranoid ideation, and detachment), emotions about others (loneliness, retrospective emotions, and recognition of self), thoughts about self (memories and social judgment), thoughts about others (paranoid ideation and narrative), physiological reactions (anxiety and cybersickness), behavior of avatars (narrative, duration of interaction, and characteristics), interactivity with environment (movement and familiarity), and environmental characteristics (restrictions). Sense of presence was facilitated when the VR elicited genuine cognitive, emotional, and behavioral responses, and when participants created their own narrative about events. Presence decreased when participants experienced diminished agency and experienced physical impediments, such as cybersickness and awareness of apparatus and body movement. Strengths of the study include rich data generated by the qualitative approach and the large sample size. Limitations include lack of follow-up measuring longer-term effects.