The acidic carboxy-terminal 89-amino acid fragment of bacteriophage T4 gene 32 protein was expressed in Escherichia coli to high levels from an inducible plasmid construct. Infection of induced cells by wild-type T4 phage results in impaired phage DNA synthesis. The time at which DNA synthesis begins and the diminution in DNA synthesis rates correlate with the amount of carboxy-terminal peptide that accumulates intracellularly prior to infection. Correspondingly, when induced cells are infected with viable phage containing a small deletion near the carboxy-terminus of 32 protein (delta PR201), the inhibition of phage DNA synthesis was much more severe. The mutant 32 protein competes less well against overproduced wild-type acid peptide than does wild-type 32 protein. The purified acid peptide, when used as the attached ligand for affinity chromatography, binds several T4 proteins from phage-infected cells, including 43 protein (T4 DNA polymerase), Dda protein (a DNA helicase), and UvsX protein (a Rec-like recombination protein). Furthermore, at 50- to 100-fold molar excess of acid peptide over intact 32 protein, phage DNA synthesis was specifically inhibited at the initiation step in an in vitro 5-protein DNA replication experiment. We propose that one or more phage replication proteins are titrated as non-productive protein-protein complexes at a site away from the DNA template. This implies that the carboxy-terminal domain of 32 protein is involved in an obligate step of replication machine assembly when the protein is properly attached to ssDNA in the vicinity of a primer-template junction. The assembly defect we observe is strikingly similar to the repression, or "squelching", of the activity of certain eukaryotic transcriptional activators.