It started as an experiment – as things often do in this industry. Icelandic game developer CCP wanted to find out what was possible with the Oculus Rift, a virtual reality (VR) gaming headset that has become a major tech phenomenon since its successful Kickstarter appeal in August 2012.

So the company put a small team on a VR project and got to work. Since its main IP, the hugely successful online multiplayer title Eve: Online, features spaceships prominently, a space combat simulator seemed like the obvious start point. EVE: Valkyrie, then, puts players into the cockpit of a star fighter which must battle it out against a range of computer controlled craft in zero gravity. Imagine the swirling, fast-paced dog fights that defined Star Wars and Battlestar Galactica, and you have Valkyrie, except here it's interactive and utterly immersive.

As we discovered at E3, no description can really prepare you for the experience of putting on the Rift and actually playing. Once the headset and earphones are in place, the outside world is obliterated and replaced with the a first-person view of the ship’s cockpit. Look left and right and you can see the cannons on the starfighter’s wings. Look down and you see "your" torso and legs in a flight suit. Look behind you and you can see the exit hatch.

Of course, if Eve: Valkyrie was a traditional flight sim, you could do all of that using the thumbstick on a controller – but that’s the point: with the Rift, intuitive head movement replaces fiddly controls and the degree of immediate agency it gives you is staggering. For example, your ship’s missile lock is mapped to the Rift and, if you pull in the left trigger, it targets what you’re looking at – what's more, your target area increases exponentially the more you look around.

Valkyrie is also built to combat the motion sickness that many people associate with virtual reality experiences. You never leave the cockpit, so you don't get the giddy feeling that often comes when controlling a character physically moving on screen. Also, thanks to the Rift’s Time Warp function – John Carmac’s software addition to Oculus’s headset – the frame rate appears faster than it is. This cuts down on motion blur and makes all the action look a lot crisper.

Eve: Valkyrie may still be a long way from release and to a degree it still feels like a tech demo for the Oculus Rift (although it is also being developed for Sony's Project Morpheus headset). However, CCP is talking about linking the game in with EVE Online, and expanding its narrative, so that the dog-fighting action is part of the wider universe. We can also expect a range of spacecraft as well as customisable weapons, and team-based multiplayer action.

But really, it's all about the feeling of being out there in space, surrounded by other ships, by satellites, by planets floating in the distance. If this turns out to be a genuine taste of what’s to come, the idea of virtual reality as a mainstream entertainment proposition has just got a little less outlandish.

• Eve Valkyrie is currently scheduled for release on PC and PlayStation 4. release date is to be confirmed

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• EVE Online fanfest: the party at the top of the world