Escherichia coli Eco8 is an anti-phage defense system consisting of a reverse transcriptase, a class 3 overcoming lysogenization defect (OLD) nuclease, and a DNA-RNA chimera called multi-copy single-stranded DNA (msDNA). Genetic and biochemical data suggest that Eco8-mediated anti-phage defense is triggered by the phage single-stranded DNA (ssDNA)-binding proteins, but the underlying structural basis remains unknown. Here, we demonstrate that the DNA cleavage and ATP hydrolysis activities of the OLD nuclease are critical for Eco8-mediated anti-phage defense. We also determine the cryoelectron microscopy (cryo-EM) structures of Eco8 alone and in complex with the T7 phage ssDNA-binding protein. Structural analysis reveals that the reverse transcriptase, msDNA, and OLD nuclease form a megacomplex with a 4:4:4 stoichiometry. The T7 phage ssDNA-binding protein unwinds the msDNA and transforms Eco8 into an ATP-dependent DNA-degrading machinery. This study not only elucidates the molecular mechanism of Eco8-mediated anti-phage defense but also validates that msDNA serves as a sensor of phage DNA-modifying/binding proteins.