Signals mediated by the chemokine CXCL12 and its receptor CXCR4 are involved in the progression of ovarian cancer through enhancement of tumor angiogenesis and immunosuppressive networks that regulate dissemination of peritoneal metastasis and development of cancer-initiating cells (CICs). In this study, we investigated the antitumor efficacy of a CXCR4 antagonist expressed by oncolytic vaccinia virus (OVV) against an invasive variant of the murine epithelial ovarian cancer cell line ID8-T. This variant harbors a high frequency of CICs that form multilayered spheroid cells and express the hyaluronan receptor CD44, as well as stem cell factor receptor CD117 (c-kit). Using an orthotopic ID8-T tumor model, we observed that i.p. delivery of a CXCR4 antagonist-expressing OVV led to reduced metastatic spread of tumors and improved overall survival compared with oncolysis alone. Inhibition of tumor growth with the armed virus was associated with efficient killing of CICs, reduced expression of ascitic CXCL12 and vascular endothelial growth factor, and decreases in i.p. numbers of endothelial and myeloid cells, as well as plasmacytoid dendritic cells. These changes, together with reduced recruitment of T regulatory cells, were associated with higher ratios of IFN-g+/IL-10+ tumor-infiltrating T lymphocytes, as well as induction of spontaneous humoral and cellular antitumor responses. Similarly, the CXCR4 antagonist released from virally infected human CAOV2 ovarian carcinoma cells inhibited peritoneal dissemination of tumors in SCID mice, leading to improved tumor-free survival in a xenograft model. Our findings demonstrate that OVV armed with a CXCR4 antagonist represents a potent therapy for ovarian CICs with a broad antitumor repertoire.