T7 RNA polymerase selectively transcribes T7 genes during infection but is also involved in DNA replication, maturation and packaging. T7 lysozyme is an amidase that cuts a bond in the peptidoglycan layer of the cell wall, but it also binds T7 RNA polymerase and inhibits transcription, and it stimulates replication and packaging of T7 DNA. To better understand the roles of these two proteins during T7 infection, mutants of each were constructed or selected and their biochemical and physiological behavior analyzed. The amidase activity of lysozyme is needed for abrupt lysis and release of phage particles but appears to have no role in replication and packaging. The interaction between polymerase and lysozyme stimulates both replication and packaging. Polymerase mutants that gain the ability to grow normally in the absence of an interaction with lysozyme still fail to shut down late transcription and, remarkably, have become hypersensitive to inhibition when lysozyme is able to bind. These lysozyme-hypersensitive polymerases behave without lysozyme similarly to wild-type polymerase with lysozyme: both remain longer at the promoter before establishing a lysozyme-resistant elongation complex and both increase the length of pausing when elongation complexes encounter an eight-base recognition sequence involved in DNA packaging. Replication origins contain T7 promoters, but the role of T7 RNA polymerase in initiating replication is not understood well enough to more than speculate how the lysozyme-polymerase interaction stimulates replication. Maturation and packaging is apparently initiated through interaction between prohead-terminase complexes and transcription elongation complexes paused at the sequence TATCTGT(T/A), well conserved at the right-end of the concatemer junction of T7-like phages. A model that is consistent with the structure of an elongation complex and a large body of mutational and biochemical data is proposed to explain sequence-specific pausing and potential termination at the consensus recognition sequence (C/T)ATCTGT(T/A).