How Far Are VLMs from Privacy Awareness in the Physical World? An Empirical Study

As Vision-Language Models (VLMs) are increasingly deployed as autonomous cognitive cores for embodied assistants, evaluating their privacy awareness in physical environments becomes critical. Unlike digital chatbots, these agents operate in intimate spaces, such as homes and hospitals, where they possess the physical agency to observe and manipulate privacy-sensitive information and artifacts. However, current benchmarks remain limited to unimodal, text-based representations that cannot capture the demands of real-world settings. To bridge this gap, we present ImmersedPrivacy, an interactive audio-visual evaluation framework that simulates realistic physical environments using a Unity-based simulator. ImmersedPrivacy evaluates physically grounded privacy awareness across three progressive tiers. Our evaluation of 12 state-of-the-art models reveals consistent deficits. In cluttered scenes, all models exhibit monotonic performance decay as scene complexity grows due to perceptual deficit. When social context shifts, no model exceed 65% selection accuracy. Under conflicting commands, the best model gemini-3.1-pro perfectly balances task completion and privacy preservation in only 51% of cases. These findings reveal that current VLMs in the physical world suffer from perceptual fragility and fail to let their knowledge of privacy cues govern their situated behavior. Our code and data is available at https://anonymous.4open.science/r/immersed-privacy-review-3A3C.