Objective To explore the effect of virtual reality (VR)-based baduanjin exercise on the cognition, physical functioning and life quality of elderly persons with mild cognitive impairment (MCI). Methods Fifty-seven mildly impaired elderly persons were randomly divided into an observation group (n=29) and a control group (n=28). Both groups were given routine care and health education in their nursing homes, while the observation group additionally performed 50 minutes of VR baduanjin exercise three times a week for 24 weeks. Both groups were assessed using the Montreal cognitive assessment (MoCA), the Rivermead behavioural memory test (second edition) (RBMT-Ⅱ), a digit-symbol substitution test (DSST) and the Trail Making Test (TMT). The short physical performance battery (SPPB) and Alzheimer′s disease quality of life (QOL-AD) instrument were also administered before and after the 24-week intervention. Results After the intervention the average MoCA, RBMT-Ⅱ, DSST, TMT-A, SPPB and QOL-AD results of the observation group were all significantly better than before the intervention and better than the control group′s averages. The observation group also performed better on the 5 times sit-to-stand test, the tandem standing test and a walking speed test after the intervention. Conclusions VR-based baduanjin practice can effectively improve the cognition and physical functioning of mildly impaired elderly persons, as well as improving their quality of life.