Therapeutic manipulation of the gut microbiota holds great potential for human health. The mechanisms bacteria use to colonize the gut therefore present valuable targets for clinical intervention. We now report that bacteria use phase separation to enhance fitness in the mammalian gut. We establish that the intrinsically disordered region (IDR) of the broadly and highly conserved transcription termination factor Rho is necessary and sufficient for phase separation in vivo and in vitro in the human commensal Bacteroides thetaiotaomicron. Phase separation increases transcription termination by Rho in an IDR-dependent manner. Moreover, the IDR is critical for gene regulation in the gut. Our findings expose phase separation as vital for host-commensal bacteria interactions and relevant for novel clinical applications.