phiSa3ms, a lysogenic bacteriophage encoding the staphylococcal enterotoxins SEA, SEG, and SEK and the fibrinolytic enzyme staphylokinase (Sak), was identified in the unannotated genome sequence of the hypervirulent community-acquired Staphylococcus aureus strain 476. We found that mitomycin C induction of phiSa3ms led to increased transcription of all four virulence factors. The increase in sea and sak transcription was a result of read-through transcription from upstream latent phage promoters and an increase in phage copy number. The majority of the seg2 and sek2 transcripts were shown to initiate from the upstream phage cI promoter and hence were regulated by factors influencing cI transcription. The lysogeny module of phiSa3ms was shown to have some lambda-like features with divergent cI and cro genes. Band shift assays were used to identify binding sites for both CI and Cro within the region between these genes, suggesting a mechanism of control for the phiSa3ms lytic-lysogenic switch. Our findings suggest that the production of phage-encoded virulence factors in S. aureus may be regulated by processes that govern lysogeny.