Cytolethal distending toxins (CDTs) are inhibitory cyclomodulins, which block eukaryotic cell proliferation and are produced by a diverse group of Gram-negative bacteria, including Escherichia coli strains associated with intestinal and extraintestinal infections. However, the mode of transmission of the toxin gene clusters among diverse bacterial pathogens is unclear. We found that Cdt-I produced by enteropathogenic E. coli strains associated with diarrhea is encoded by a lambdoid prophage, which is inducible and infectious. The genome of Cdt-I converting phage (CDT-1Phi) comprises 47,021 nucleotides with 60 predicted ORFs organized into six genomic regions encoding the head and tail, virulence, integrase, unknown functions, regulation, and lysis. The genomic organization of CDT-1Phi is similar to those of SfV, a serotype-converting phage of Shigella flexneri, and UTI89, a prophage identified in uropathogenic E. coli. Besides the cdtI gene cluster, the virulence region of CDT-1Phi genome contains sequences homologous to a truncated cycle inhibiting factor and a type 3 effector protein. Mutation analysis of susceptible E. coli strain C600 suggested that the outer membrane protein OmpC is a putative receptor for CDT-1Phi. CDT-1Phi genome was also found to integrate into the host bacterial chromosome forming lysogens, which produced biologically active Cdt-I. Furthermore, phage induction appeared to cause enhanced toxigenicity of the E. coli strains carrying lysogenic CDT-1Phi. Our results suggest that CDT-1Phi is the latest member of a growing family of lambdoid phages encoding bacterial cyclomodulins and that the phage may have a role in horizontal transfer of these virulence genes.