Oncolytic viruses are complex biological agents that interact at multiple levels with both tumour and normal tissues. Antiviral pathways induced by interferon are known to have a critical role in determining tumour cell sensitivity and normal cell resistance to infection with oncolytic viruses. Here we pursue a synthetic biology approach to identify methods that enhance antitumour activity of oncolytic viruses through suppression of interferon signalling. On the basis of the mathematical analysis of multiple strategies, we hypothesize that a positive feedback loop, established by virus-mediated expression of a soluble interferon-binding decoy receptor, increases tumour cytotoxicity without compromising normal cells. Oncolytic rhabdoviruses engineered to express a secreted interferon antagonist have improved oncolytic potential in cellular cancer models, and display improved therapeutic potential in tumour-bearing mice. Our results demonstrate the potential of this methodology in evaluating potential caveats of viral immune-evasion strategies and improving the design oncolytic viruses.