Temperate viruses can integrate into the genome of their host cells, a process called lysogeny. In every infection, such viruses need to decide between the lytic and the lysogenic cycles, namely whether to replicate and lyse their host or to lysogenize and keep the host viable. Here we show that viruses (phages) of the spBeta family use a small-molecule communication system to coordinate lysis-lysogeny decisions. During infection of its Bacillus host cell, the phage produces a 6aa communication peptide that is released to the medium. In subsequent infections, progeny phages measure the concentration of this peptide and lysogenize if the concentration is sufficiently high. We found that different species of the phage family encode different versions of the communication peptide, demonstrating a species-specific peptide communication code for lysogeny decisions. We termed this communication system the “arbitrium” system, and further show that it is encoded by 3 phage genes: aimP, producing the peptide, aimR, the intracellular peptide receptor, and aimX, a negative regulator of lysogeny. AimR, as a homodimer, is a transcriptional activator of AimX. When bound by the peptide AimR becomes a monomer and the transcription of AimX is repressed, leading to lysogeny. The arbitrium system enables an offspring phage particle to communicate with its predecessors, i.e., to estimate the amount of recent prior infections and hence decide whether to employ the lytic or lysogenic cycle.