Music Performance Anxiety (MPA) is highly prevalent among musicians and often debilitating, associated with changes in cognitive, emotional, behavioral, and physiological responses to performance situations. Efforts have been made to create simulated performance environments in conservatoires and Virtual Reality (VR) to assess their effectiveness in managing MPA. Despite these advances, results have been mixed, underscoring the need for controlled experimental designs and joint analyses of performance, physiology, and subjective ratings in these settings. Furthermore, the broader application of simulated performance environments for at-home use and laboratory studies on MPA remains limited. We designed VR scenarios to induce MPA in pianists and embedded them within a controlled within-subject experimental design to systematically assess their effects on performance, physiology, and anxiety ratings. Twenty pianists completed a performance task under two conditions: a public 'Audition' and a private 'Studio' rehearsal. Participants experienced VR pre-performance settings before transitioning to live piano performances in the real world. We measured subjective anxiety, performance (MIDI data), and heart rate variability (HRV). Compared to the Studio condition, pianists in the Audition condition reported higher somatic anxiety ratings and demonstrated an increase in performance accuracy over time, with a reduced error rate. Additionally, their performances were faster and featured increased note intensity. No concurrent changes in HRV were observed. These results validate the potential of VR to induce MPA, enhancing pitch accuracy and invigorating tempo and dynamics. We discuss the strengths and limitations of this approach to develop VR-based interventions to mitigate the debilitating effects of MPA.