Bacteria persist under constant threat of predation by bacterial viruses (phages). Bacteria-phage conflicts result in evolutionary arms races often driven by mobile genetic elements (MGEs). One such MGE, a phage satellite in Vibrio cholerae called PLE, provides specific and robust defense against a pervasive lytic phage, ICP1. The interplay between PLE and ICP1 has revealed strategies for molecular parasitism allowing PLE to hijack ICP1 processes in order to mobilize. Here, we describe the mechanism of PLE-mediated transcriptional manipulation of ICP1 structural gene transcription. PLE encodes a novel DNA binding protein, CapR, that represses ICP1’s capsid morphogenesis operon. Although CapR is sufficient for the degree of capsid repression achieved by PLE, its activity does not hinder the ICP1 lifecycle. We explore the consequences of repression of this operon, demonstrating that more stringent repression achieved through CRISPRi restricts both ICP1 and PLE. We also discover that PLE transduces in modified ICP1-like particles. Examination of CapR homologs led to the identification of a suite of ICP1-encoded homing endonucleases, providing a putative origin for the satellite-encoded repressor. This work unveils a facet of the delicate balance of satellite-mediated inhibition aimed at blocking phage production while successfully mobilizing in a phage-derived particle.