Modular Construction (MC) is a modern construction method that involves manufacturing building components offsite in a controlled factory environment before transporting them for onsite assembly (OA). While MC offers numerous benefits, such as reduced construction time and cost, it also presents unique OA risks. This paper presents the development and evaluation of a novel virtual reality (VR)-based tool for mitigating the OA stage risks associated with MC. The VR tool encapsulates eight training and assessment scenarios, each depicting risks and hazards found at the OA stage of MC. The VR training scenarios impart to users a knowledge of OA’s risks, hazards, and possible solutions, while the VR assessment scenarios test users’ ability to identify and address OA risks and hazards within the immersive simulated environment. A study of users was conducted to evaluate the VR tool’s effectiveness, by obtaining objective (risk and hazard identification index—RII and HII, and ergonomic risks) and subjective (pre- and post-experiment questionnaire) data from 22 architecture and construction students. The results showed that the tool improved the users’ ability to identify and assess, as well as their overall knowledge of the OA stage of MC with 0.78 and 0.76 overall scores for RII and HII. The study also found that users experienced low ergonomic risks and load during the experiment and found a high degree of usability of the VR tool. This study is among the first to develop a VR tool for mitigating the risks of MC, thus contributing to filling this knowledge gap in the domain, leading to improved safety and productivity for MC projects.