Abstract: Oncolytic microorganism-mediated therapy has emerged as a promising strategy in tumor immunotherapy due to its unique targeting capabilities and immunomodulatory effects. Oncolytic microorganisms, including oncolytic bacteria and viruses, selectively infect and lyse tumor cells, activating host immune responses and significantly enhancing their therapeutic efficacy. To overcome the numerous challenges faced in the clinical application of natural oncolytic microorganisms—including host immune clearance, insufficient in vivo stability, and off-target effects—pharmaceutical formulation technologies play a pivotal role in optimizing oncolytic microbial therapies. This review discusses the mechanisms, preclinical and clinical progress of oncolytic bacteria and viruses, with a focus on the application challenges and optimized pharmaceutical strategies, aiming to provide some reference for the development and clinical translation of oncolytic microbial formulations.