Bacteriophage T7 terminator T phi is a class I intrinsic terminator coding for an RNA hairpin structure immediately followed by oligo(U), which has been extensively studied in terms of its transcription termination mechanism, but little is known about its physiological or regulatory functions. In this study, using a T7 mutant phage, where a 31-bp segment of T phi was deleted from the genome, we discovered that deletion of T phi from T7 reduces the phage burst size but delays lysis timing, both of which are disadvantageous for the phage. The burst downsizing could directly result from T phi deletion-caused upregulation of gene 17.5, coding for holin, among other T phi downstream genes, because infection of gp17.5-overproducing Escherichia coli by wild-type T7 phage showed similar burst downsizing. However, the lysis delay was not associated with cellular levels of holin or lysozyme or with rates of phage adsorption. Instead, when allowed to evolve spontaneously in five independent adaptation experiments, the T phi lacking mutant phage, after 27 or 29 passages, recovered both burst size and lysis time reproducibly by deleting early genes 0.5, 0.6, and 0.7 of class I, among other mutations. Deletion of genes 0.5 to 0.7 from the T phi-lacking mutant phage decreased expression of several T phi downstream genes to levels similar to that of the wild-type phage. Accordingly, phage T7 lysis timing is associated with cellular levels of T phi downstream gene products. This suggests the involvement of unknown factor(s) besides the known lysis proteins, lysozyme and holin, and that T phi plays a role of optimizing burst size and lysis time during T7 infection. IMPORTANCE Bacteriophages are bacterium-infecting viruses. After producing numerous progenies inside bacteria, phages lyse bacteria using their lysis protein(s) to get out and start a new infection cycle. Normally, lysis is tightly controlled to ensure phage progenies are maximally produced and released at an optimal time. Here, we have discovered that phage T7, besides employing its known lysis proteins, additionally uses its transcription terminator T phi to guarantee the optimal lysis of the E. coli host. T phi, positioned in the middle of the T7 genome, must be inactivated at least partially to allow for transcription-driven translocation of T7 DNA into hosts and expression of T phi downstream but promoter-lacking genes. What role is played by T phi before inactivation? Without T phi, not only was lysis time delayed but also the number of progenies was reduced in this study. Furthermore, T7 can overcome T phi deletion by further deleting some genes, highlighting that a phage has multiple strategies for optimizing lysis.