The deal is made up of $400m in cash and just over 23 million Facebook shares, valued at $1.6bn. Oculus employees will receive another $300m if the company achieves certain targets.
The Californian startup was developed with $2.4m funding from crowdfunding site Kickstarter, plus $75m from investors.
The startup has yet to release its main product – the Oculus Rift virtual reality video gaming headset – but Facebook said more than 75,000 development kits are on order.
Facebook's founder Mark Zuckerberg said: "Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow. Oculus' technologies could "change the way we work, play and communicate”.
The social media firm said in a statement that it plans to expand the use of Oculus technologies to include “communications, media and entertainment, education and other areas".
Read about other Facebook acquisitions
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But analysts say that, just as with WhatsApp, Facebook will have to tread carefully to avoid alienating the virtual reality startup’s existing fanbase.
The first blow came from Markus Persson, the creator of the block-building game, Minecraft.
"We were in talks about maybe bringing a version to Oculus, but I just cancelled that deal. Facebook creeps me out,” he said.
Other developers have also expressed their unhappiness in reaction to the acquisition announcement on the Oculus VR homepage.
One developer wrote: "I have unsubscribed. I will be cancelling my pre-order, I will not make games with the Rift and I am not associating myself with a Facebook-affiliated company."
Another developer said: "I am really upset by this. I had nothing but grief as a developer of Facebook titles, and the direction and actions of the Facebook company are not ones I can support."
But not all reactions have been negative, reports the Guardian. Some developers said Facebook will give Oculus much wider exposure than it has enjoyed so far, and help establish the virtual reality market.
Others said Facebook could help Oculus find ways for its developers to monetise their creations and push the Oculus Rift forward with software support.