This study aimed to evaluate the use of a by-product, olive cake silage (OCS), as a forage replacement in sheep diets for the improvement of fatty acid (FA) content of milk and thus, the lipids of the ovine halloumi cheese produced. Sixty second-parity purebred Chios ewes in mid-lactation were assigned to three diet treatments (2 lots of 10 animals per treatment) receiving 0%, 10%, and 20% of OCS on dry matter basis for 3 weeks (treatments S0, S10, and S20, respectively). Halloumi cheese was manufactured from fresh raw milk of ewes fed the three different diets. Inclusion of OCS in the diets increased linearly the concentration in milk of unsaturated FA up to 20%, monounsaturated FA up to 23%, polyunsaturated FA up to 11%, rumenic acid (CLA cis-9, trans-11) up to 61%, and consequently reduced the atherogenicity and thrombogenicity milk indices by 31% and 27%, for the S10 and S20 treatments, respectively, compared with the control treatment. Moreover, these differences were carried over to the lipid profile of ovine halloumi cheese showing, on average, more than 25% increase of unsaturated, polyunsaturated, and monounsaturated FA, with particularly enhanced oleic and rumenic acid content. These changes resulted in reduced atherogenicity by 29% and 45% and thrombogenicity by 23% and 24% of ovine halloumi cheese made from milk of S10 and S20 diets, respectively. Milk yield, milk fat, or protein content was not affected by S10 or S20 feeding treatments compared to control. Overall, the applied ensiling method of olive cake produces a by-product that can be included as a forage replacement up to 20% of DM intake in Chios sheep without adversely affecting the lactating performance. Furthermore, the present study showed that such substitution improves the lipid quality of milk and related halloumi cheese enriching these ovine dairy products with beneficial to human health fatty acids.