The formation of araB-lacZ coding sequence fusions in Escherichia coli is a particular type of chromosomal rearrangement induced by Mucts62, a thermoinducible mutant of mutator phage Mu. Fusion formation is controlled by the host physiology. It only occurs after aerobic carbon starvation and requires the phage-encoded transposase pA, suggesting that these growth conditions trigger induction of the Mucts62 prophage. Here, we show that thermal induction of the prophage accelerated araB-lacZ fusion formation, confirming that derepression is a rate-limiting step in the fusion process. Nonetheless, starvation conditions remained essential to complete fusions, suggesting additional levels of physiological regulation. Using a transcriptional fusion indicator system in which the Mu early lytic promoter is fused to the reporter E. coli lacZ gene, we confirmed that the Mucts62 prophage was derepressed in stationary phase (S derepression) at low temperature. S derepression did not apply to prophages that expressed the Mu wild-type repressor. It depended upon the host ClpXP and Lon ATP-dependent proteases and the RpoS stationary phase-specific σ factor, but not upon Crp. None of these four functions was required for thermal induction. Crp was required for fusion formation, but only when the Mucts62 prophage encoded the transposition/replication activating protein pB. Finally, we found that thermally induced cultures did not return to the repressed state when shifted back to low temperature and, hence, remained activated for accelerated fusion formation upon starvation. The maintenance of the derepressed state required the ClpXP and Lon host proteases and the prophage Ner-regulatory protein. These observations illustrate how the cts62 mutation in Mu repressor provides the prophage with a new way to respond to growth phase-specific regulatory signals and endows the host cell with a new potential for adaptation through the controlled use of the phage transposition machinery.