The start-up's flagship product, the Oculus Rift, is a goggle-like "immersive" headset for video gaming.
It was developed with funds raised through crowdfunding site Kickstarter, and subsequent investment.
Facebook's boss, Mark Zuckerberg, said Oculus' technologies could "change the way we work, play and communicate".Continue reading the main story Analysis Dave Lee Technology reporter, BBC News
Over the past two years or so Oculus Rift has been getting the video games industry very excited. The immersive experience quite literally adds a new dimension to video games - one demo in particular involving a huge monster had even hardened gamers jumping in their seats.
But as well as entertainment, the Oculus VR team has also been keen to show off the technology's other uses - particularly when it comes to communication. It certainly seems it is this aspect of Oculus Rift that Mark Zuckerberg finds most appealing.
But there could be serious bumps along the way. Oculus Rift is - for the moment at least - likely to be expensive hardware. I say likely because it hasn't even made it to the shops yet.
And it faces a serious competitor in the form of Sony which has its own similar product, Project Morpheus.
The Oculus Rift has yet to be released, but more than 75,000 orders for development kits have already been placed, according to the social media giant.
In a statement released on Tuesday, Facebook said it plans to expand the use of Oculus technologies to include "communications, media and entertainment, education and other areas".
Oculus' crowdfunding campaign raised $2.4m (£1.5m), 10 times the amount originally sought.
It subsequently received a further $75m from investors.
The Rift headset was widely heralded at the CES technology show in Las Vegas in January, where Sony also announced a rival product.
The deal includes $400m in cash and just over 23 million Facebook shares, valued at $1.6bn.
Oculus employees will also receive an additional $300m if the company achieves certain targets.