Gene 2.5 of bacteriophage T7 is an essential gene that encodes a single-stranded DNA-binding protein (gp2.5). Previous studies have demonstrated that the acidic carboxyl terminus of the protein is essential and that it mediates multiple protein-protein interactions. A screen for lethal mutations in gene 2.5 uncovered a variety of essential amino acids, among which was a single amino acid substitution, F232L, at the carboxyl-terminal residue. gp2.5-F232L exhibits a 3-fold increase in binding affinity for single-stranded DNA and a slightly lower affinity for T7 DNA polymerase when compared with wild type gp2.5. gp2.5-F232L stimulates the activity of T7 DNA polymerase and, in contrast to wild-type gp2.5, promotes strand displacement DNA synthesis by T7 DNA polymerase. A carboxyl-terminal truncation of gene 2.5 protein, gp2.5-Delta 26C, binds single-stranded DNA 40-fold more tightly than the wild-type protein and cannot physically interact with T7 DNA polymerase. gp2.5-Delta 26C is inhibitory for DNA synthesis catalyzed by T7 DNA polymerase on single-stranded DNA, and it does not stimulate strand displacement DNA synthesis at high concentration. The biochemical and genetic data support a model in which the carboxyl-terminal tail modulates DNA binding and mediates essential interactions with T7 DNA polymerase.