An experiment was conducted in a Cave-like environment to explore the relationship between physiological responses and breaks in presence and utterances by virtual characters towards the participants. Twenty people explored a virtual environment (VE) that depicted a virtual bar scenario. The experiment was divided into a training and an experimental phase. During the experimental phase breaks in presence (BIPs) in the form of whiteouts of the VE scenario were induced for 2 s at four equally spaced times during the approximately 5 min in the bar scenario. Additionally, five virtual characters addressed remarks to the subjects. Physiological measures including electrocardiagram (ECG) and galvanic skin response (GSR) were recorded throughout the whole experiment. The heart rate, the heart rate variability, and the event-related heart rate changes were calculated from the acquired ECG data. The frequency response of the GSR signal was calculated with a wavelet analysis. The study shows that the heart rate and heart rate variability parameters vary significantly between the training and experimental phase. GSR parameters and event-related heart rate changes show the occurrence of breaks in presence. Event-related heart rate changes also signified the virtual character utterances. There were also differences in response between participants who report more or less socially anxious.