Abstract Glioblastoma (GBM) has a dismal prognosis. Evidence from preclinical tumor models and human trials indicates the role of GBM-initiating cells (GIC) in GBM drug resistance. Here, we propose a new treatment option with tumor enzyme-activatable, combined therapeutic and diagnostic (theranostic) nanoparticles, which caused specific toxicity against GBM tumor cells and GICs. The theranostic cross-linked iron oxide nanoparticles (CLIO) were conjugated to a highly potent vascular disrupting agent (ICT) and secured with a matrix-metalloproteinase (MMP-14) cleavable peptide. Treatment with CLIO-ICT disrupted tumor vasculature of MMP-14–expressing GBM, induced GIC apoptosis, and significantly impaired tumor growth. In addition, the iron core of CLIO-ICT enabled in vivo drug tracking with MR imaging. Treatment with CLIO-ICT plus temozolomide achieved tumor remission and significantly increased survival of human GBM-bearing mice by more than 2-fold compared with treatment with temozolomide alone. Thus, we present a novel therapeutic strategy with significant impact on survival and great potential for clinical translation. Mol Cancer Ther; 16(9); 1909–21. ©2017 AACR.