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Reversible genomic DNA inversions control the expression of numerous gut bacterial molecules, but how this impacts disease remains uncertain. By analyzing metagenomic samples from inflammatory bowel disease (IBD) cohorts, we identified multiple invertible regions where a particular orientation correlated with disease. These include the promoter of polysaccharide A (PSA) of Bacteroides fragilis , which induces regulatory T cells (Tregs) and ameliorates experimental colitis. The PSA promoter was mostly oriented "OFF" in IBD patients, which correlated with increased B. fragilis -associated bacteriophages. Similarly, in mice colonized with a healthy human microbiota and B. fragilis , induction of colitis caused a decline of PSA in the "ON" orientation that reversed as inflammation resolved. Monocolonization of mice with B. fragilis revealed that bacteriophage infection increased the frequency of PSA in the "OFF" orientation, causing reduced PSA expression and decreased Treg cells. Altogether, we reveal dynamic bacterial phase variations driven by bacteriophages and host inflammation, signifying bacterial functional plasticity during disease. [Display omitted] • Distinct DNA inversion patterns of Bacteroidales in healthy vs. IBD patients • Inflamed gut induces DNA inversion of the immunomodulatory PSA of B. fragilis • Bacteriophage levels correlate with bacterial DNA inversions in patients • Isolated bacteriophage affects PSA phase variation and Treg levels Carasso et al. unveil distinct DNA inversion patterns of Bacteroidales in IBD patients and murine models of gut inflammation. The inflammatory milieu and bacteriophages can reversibly induce the "OFF" state of the anti-inflammatory PSA promoter of B. fragilis , offering insights on bacterial functional plasticity during gut inflammation. [ABSTRACT FROM AUTHOR]