Phase transitions can change the crystal structure and modify the physical properties of crystals. In this work, we investigate the phase transition behavior in BaGa4Se7, an important middle infrared (mid-IR) nonlinear optical (NLO) crystal, in the temperature range from room temperature to 1173 K. Interestingly, the BaGa4Se7 crystal undergoes a reversible ferroelastic phase transition at T = 528 K, resulting in the presence of a newly discovered phase (γ-phase) at the higher temperature. The experimental temperature dependence of optical birefringence, as well as the first-principles birefringence and NLO coefficients, reveals that the γ-phase exhibits larger birefringence and better NLO properties compared with those of the low-temperature phase (α-phase). This work demonstrates that phase-transition-induced structural modification can improve the mid-IR NLO properties, which would provide an effective avenue to obtain materials with good optoelectronic performance.