This research uses theories of flow, telepresence, positive emotions, and brand equity to examine the effect of using two-dimensional versus three-dimensional virtual world environments on telepresence, enjoyment, brand equity, and behavioral intention. The findings suggest that the 3D virtual world environment produces both positive and negative effects on brand equity when compared to the 2D environment. The positive effect of the 3D virtual world environment on brand equity occurs through telepresence, a specific aspect of flow, as well as enjoyment. The negative effect on brand equity can be explained using distraction–conflict theory in which attentional conflicts faced by users of a highly interactive and rich medium resulted in distractions from attending to the brand. Brand equity, in turn, has a positive effect on behavioral intention. The results suggest that although the 3D virtual world environment has the potential to increase brand equity by offering an immersive and enjoyable virtual product experience, the rich environment can also be a distraction. Therefore, developers of virtual world branding sites need to take into account limitations in the information processing capacity and attention span of users when designing their sites in order to avoid cognitive overload, which can lead to users being distracted from branding information. This paper not only provides a theoretical foundation for explaining users’ experience with 2D versus 3D virtual world branding sites, but also provides insights to practitioners for designing 3D virtual world sites to enhance brand equity and intentions through user engagement.