Newcastle disease virus (NDV) has been previously shown to possess oncolytic activity, causing specific lysis of cancerous but not normal cells. Here we show that despite these findings, the oncolytic efficiency of naturally occurring NDV strains can still be relatively low, as many tumors exhibit strong innate immune responses that suppress viral replication and spread. To overcome this problem, we generated a recombinant fusogenic NDV expressing influenza NS1 protein, a protein exhibiting interferon (IFN)-antagonist and antiapoptotic functions in human and mouse cells. Interestingly, the resultant virus was dramatically enhanced in its ability to form syncytia, lyse a variety of human and mouse tumor cell lines, and suppressed the induction of the cellular IFN responses. Using the aggressive syngeneic murine melanoma model, we show that the NDV-NS1 virus is more effective than virus not expressing NS1 in clearing the established footpad tumors and results in higher overall long-term animal survival. In addition, mice treated with NDV-NS1 exhibited no signs of toxicity to the virus and developed tumor-specific cytotoxic T lymphocyte (CTL) responses. These findings demonstrate that modulation of innate immune responses by NDV results in enhancement of its oncolytic properties and warrant further investigation of this strategy in design of oncolytic NDV vectors against human tumors.