Nitric oxide (NO) is one of the toxic metabolites that bacteria can be exposed to within phagosomes. Gre factors, which are also known as transcript cleavage factors or transcription elongation factors, relieve back-tracked transcription elongation complexes by cleaving nascent RNAs, which allows transcription to resume after stalling. Here we discovered that loss of both Gre factors in E. coli, GreA and GreB, significantly compromised NO detoxification through a phenotypic diversification of the population. Under normal culturing conditions, both wild-type and ΔgreAΔgreB synthesized protein uniformly. However, treatment with NO led to bimodal protein expression in ΔgreAΔgreB, whereas wild-type remained unimodal. Interestingly, exposure to another toxic metabolite of phagosomes, hydrogen peroxide (H2O2), produced similar results. We found that the diversification in ΔgreAΔgreB cultures required E. coli RNAP, occurred at the level of transcription, and could produce cheating where transcriptionally-deficient cells benefit from the detoxification activities of the transcriptionally-proficient subpopulation. Collectively, these results indicate that Gre factors bolster bacterial defenses by preventing phenotypic diversification and cheating in environments with fast-diffusing toxic metabolites.