Oncolytic viruses (OVs) have emerged as a powerful tool in cancer therapy. Characterized with the unique abilities to selectively target and lyse tumor cells, OVs can expedite the induction of cell death, thereby facilitating effective tumor eradication. Nanoengineering-derived OVs overcome traditional OV therapy limitations by enhancing the stability of viral circulation, and tumor targeting, promising improved clinical safety and efficacy and so on. This review provides a comprehensive analysis of the multifaceted mechanisms through which engineered OVs can suppress tumor progression. It initiates with a concise delineation on the fundamental attributes of existing OVs, followed by the exploration of their mechanisms of the antitumor response. Amid rapid advancements in nanomedicine, this review presents an extensive overview of the latest developments in the synergy between nanomaterials, nanotechnologies, and OVs, highlighting the unique characteristics and properties of the nanomaterials employed and their potential to spur innovation in novel virus design. Additionally, it delves into the current challenges in this emerging field and proposes strategies to overcome these obstacles, aiming to spur innovation in the design and application of next-generation OVs.