Oncolytic virotherapy can lead to systemic antitumor immunity, but the therapeutic potential of oncolytic viruses (OVs) in humans is limited due to their insufficient ability to overcome the immunosuppressive tumor microenvironment (TME). Here, we showed that locoregional oncolytic virotherapy upregulated the expression of PD-L1 in the TME, which was mediated by virus-induced type I and type II interferons (IFNs). To explore PD-1/PD-L1 signaling as a direct target in tumor tissue, we developed a novel immunotherapeutic herpes simplex virus (HSV), OVH-aMPD-1, that expressed a single-chain variable fragment (scFv) against PD-1 (aMPD-1 scFv). The virus was designed to locally deliver aMPD-1 scFv in the TME to achieve enhanced antitumor effects. This virus effectively modified the TME by releasing damage associated molecular patterns (DAMPs), promoting antigen cross-presentation by dendritic cells, and enhancing the infiltration of activated T cells; these alterations resulted antitumor T cell activity which led to reduced tumor burdens in a liver cancer model. Compared with OVH, OVH-aMPD-1 promoted the infiltration of myeloid-derived suppressor cells (MDSCs), resulting in significantly higher percentages of CD155+ G-MDSCs and M-MDSCs in tumors. In combination with TIGIT blockade, this virus enhanced tumor-specific immune responses in mice with implanted subcutaneous tumors or invasive tumors. These findings highlighted that intratumoral immunomodulation with an OV expressing aMPD-1 scFv could be an effective standalone strategy to treat cancers or drive maximal efficacy of a combination therapy with other immune checkpoint inhibitors.