The DNA helicase encoded by gene 4 of bacteriophage T7 assembles on single-stranded DNA as a hexamer of six identical subunits with the DNA passing through the center of the toroid. The helicase couples the hydrolysis of dTTP to unidirectional translocation on single-stranded DNA and the unwinding of duplex DNA. Phe523, positioned in a β-hairpin loop at the subunit interface, plays a key role in coupling the hydrolysis of dTTP to DNA unwinding. Replacement of Phe523 with alanine or valine abolishes the ability of the helicase to unwind DNA or allow T7 polymerase to mediate strand-displacement synthesis on duplex DNA. In vivo complementation studies reveal a requirement for a hydrophobic residue with long side chains at this position. In a crystal structure of T7 helicase, when a nucleotide is bound at a subunit interface, Phe523 is buried within the interface. However, in the unbound state, it is more exposed on the outer surface of the helicase. This structural difference suggests that the β-hairpin bearing the Phe523 may undergo a conformational change during nucleotide hydrolysis. We postulate that upon hydrolysis of dTTP, Phe523 moves from within the subunit interface to a more exposed position where it contacts the displaced complementary strand and facilitates unwinding.