How does our environment impact what we will later remember? Early work in real-world environments suggested that a matching encoding / retrieval context improves memory. However, some laboratory-based studies have not replicated this advantageous context-dependent memory effect. Using virtual reality methods, we find support for context-dependent memory effects: participants remembered more when placed in the same context as during encoding. This advantage has a tradeoff of falsely ‘recognizing’ similar lures, however. In addition, we find that schema-consistency in terms of the object-environment relationship is beneficial for memory recall, but schema-inconsistency helps recognition. Lastly, we find that differences in the presence (or absence) of dynamic background components differentially elicit the benefits of context-dependent memory. These findings not only add to our understanding of when and how context affects our memory, but they also present an exciting and more naturalistic approach to studying such effects.