Objective Targeting CD47 for cancer immunotherapy has been studied in many clinical trials for the treatment of patients with advanced tumors. However, this therapeutic approach is often hampered by on-target side effects, physical barriers, and immunosuppressive tumor microenvironment (TME).Methods To improve therapeutic efficacy while minimizing toxicities, we engineered an oncolytic vaccinia virus (OVV) encoding an anti-CD47 nanobody (OVV-αCD47nb). We demonstrated the specific binding activity of αCD47nb secreted from the virus-infected cells to CD47 and that both secreted αCD47nb and OVV-αCD47nb blocked the “don’t eat me” signal of macrophages.Results Intratumorally injected OVV-αCD47nb continuously releases the αCD47nb in tumor tissues, thereby conferring superior systemic activity against breast and colon tumor cells and prolonging survival compared with OVV control. Furthermore, treatment with OVV-αCD47nb also remodeled the TME, as shown by increased T cell infiltration, CD8+ T cell activation and tumor-associated macrophages polarization, significantly enhancing innate and adoptive immunity. Additionally, the inclusion of programmed cell death protein-1 inhibiting boosted the anticancer efficacy of OVV-αCD47nb and raised the full response rate in tumor-bearing animals.Conclusion Overall, our findings highlight the therapeutic potential of OVV-αCD47nb for breast and colon cancer, and demonstrate its ability to modulate the immune cell profiles within tumors. This has established a rationale for further exploring OVV-αCD47nb as a potential therapy in the clinic.