Background. Staphylococcus aureus causes life-threatening infections, including infective endocarditis, sepsis, and pneumonia. beta-toxin is a sphingomyelinase encoded for by virtually all S. aureus strains and exhibits human immune cell cytotoxicity. The toxin enhances S. aureus phenol-soluble modulin activity, and its activity is enhanced by superantigens. The bacteriophage phi Sa3 inserts into the beta-toxin gene in human strains, inactivating it in the majority of S. aureus clonal groups. Hence, most strains are reported not to secrete beta-toxin. Methods. This dynamic was investigated by examining beta-toxin production by multiple clonal groups of S. aureus, both in vitro and in vivo during infections in rabbit models of infective endocarditis, sepsis, and pneumonia. Results. beta-toxin phenotypic variants are common among strains containing phi Sa3. In vivo, phi Sa3 is differentially induced in heart vegetations, kidney abscesses, and ischemic liver compared to spleen and blood, and in vitro growth in liquid culture. Furthermore, in pneumonia, wild-type beta-toxin production leads to development of large caseous lesions, and in infective endocarditis, increases the size of pathognomonic vegetations. Conclusions. This study demonstrates the dynamic interaction between S. aureus and the infected host, where phi Sa3 serves as a regulator of virulence gene expression, and increased fitness and virulence in new environments.