The T7 chromosome is a double-stranded linear DNA molecule flanked by direct terminal repeats or so-called terminal redundancies. Late in infection bacteriophage T7 DNA accumulates in the form of concatemers, molecules that are comprised of T7 chromosomes joined in a head to tail arrangement through shared terminal redundancies. To elucidate the molecular mechanisms of concatemer processing, we have developed extracts that process concatemeric DNA. The in vitro system consists of an extract of phage T7-infected cells that provides all T7 gene products and minimal levels of endogenous concatemeric DNA. Processing is analyzed using a linear 32P-labeled substrate containing the concatemeric joint. T7 gene products required for in vitro processing can be divided into two groups; one group is essential for concatemer processing, and the other is required for the production of full length left-hand ends. The products of genes 8 (prohead protein), 9 (scaffolding protein), and 19 (DNA maturation) along with gene 18 protein are essential, indicating that capsids are required for processing. In extracts lacking one or more of the products of genes 2 (Escherichia coli RNA polymerase inhibitor), 5 (DNA polymerase), and 6 (exonuclease), full length right-hand ends are produced. However, the left-hand ends produced are truncated, lacking at least 160 base pairs, the length of the terminal redundancy. Gene 3 endonuclease, required for concatemer processing in vivo, is not required in this system. Both the full length left- and right-hand ends produced by the processing reaction are protected from DNase I digestion, suggesting that processing of the concatemeric joint substrate is accompanied by packaging.