Oncolytic virotherapy (OVT) is a promising approach in cancer immunotherapy. Oncolytic viruses (OVs) could be applied in cancer immunotherapy without in-depth knowledge of tumor antigens. The capability of genetic modification makes OVs exciting therapeutic tools with a high potential for manipulation. Improving efficacy, employing immunostimulatory elements, changing the immunosuppressive tumor microenvironment (TME) to inflammatory TME, optimizing their delivery system, and increasing the safety are the main areas of OVs manipulations. Recently, the reciprocal interaction of OVs and TME has become a hot topic for investigators to enhance the efficacy of OVT with less off-target adverse events. Current investigations suggest that the main application of OVT is to provoke the antitumor immune response in the TME, which synergize the effects of other immunotherapies such as immune-checkpoint blockers and adoptive cell therapy. In this review, we focused on the effects of OVs on the TME and antitumor immune responses. Furthermore, OVT challenges, including its moderate efficiency, safety concerns, and delivery strategies, along with recent achievements to overcome challenges, are thoroughly discussed.