Spatial navigation deficits are often observed among older adults on tasks that require navigating virtual reality (VR) environments on a computer screen. We investigated whether these age differences are attenuated when tested in more naturalistic and ambulatory virtual environments. In Experiment 1, young and older adults navigated a variant of the Morris Water Maze task in each of two VR conditions: a desktop VR condition which required using a mouse and keyboard to navigate, and an ambulatory VR condition which permitted unrestricted locomotion. In Experiment 2, we examined whether age- and VR-related differences in spatial performance were affected by the inclusion of additional spatial cues. In both experiments, older adults navigated to target locations less precisely than younger individuals in the desktop condition. Age differences were significantly attenuated, however, when tested in the ambulatory VR environment. These findings underscore the importance of developing naturalistic assessments of spatial memory and navigation.