Reovirus, a double-stranded RNA virus, can infect many types of cancer cells and cause oncolysis. Mammalian reovirus has exhibited promising anticancer activity in clinical trials and holds great advantages and promise as an anticancer agent. Reovirus is not associated with any serious human diseases, naturally targets and destroys tumors, and lacks the DNA synthesis stage, thus avoiding potential DNA insertion mutations. This review discusses the properties of reovirus related to oncolysis and the mechanisms of oncolytic selection, and summarizes the preclinical and clinical studies that have led to the current Phase III trial. In addition, three major challenges in the development of reovirus-mediated oncolytic therapy are discussed. These are: the mechanisms of reovirus oncolysis remain to be fully characterized; the host immune responses should be manipulated to enhance viral anti-tumor effects; and the efficacy of reovirus oncolysis may be further improved by developing new vectors and studying other double-stranded RNA viruses.