Virtual worlds have affordances to enhance collaborative learning in authentic contexts. Despite the potential of collaborative learning with a virtual world, few studies investigated whether it is more effective in student achievements than teacher-directed instruction. This study investigated the effectiveness of collaborative problem solving and collaborative observation using virtual worlds. Secondary school students (n = 101) participated in the study as part of their coursework in three geography classes. This study found that collaborative problem solving and observation were more effective in facilitating and maintaining intrinsic motivation than teacher-directed instruction. Students in the collaborative observation condition outperformed those in the other conditions when it came to knowledge gains. Lastly, collaborative problem solving and observation were more beneficial for group performance than teacher-directed instruction. These results were discussed in regard to the impacts of interactive learning and the cognitive load of using virtual worlds.