Escherichia coli O157:H7 is a human pathogen that resides asymptomatically in its bovine host. The level of Shiga toxin (Stx) produced is variable in bovine-derived strains in contrast to human isolates that mostly produce high levels of Stx. To understand the genetic basis for varied Stx production, chronological collections of bovine isolates from Wisconsin dairy farms, R and X, were analyzed for multilocus prophage polymorphisms, stx(2) subtypes, and the levels of stx(2) transcript and toxin. The E. coli O157:H7 that persisted on both farms were phylogenetically distinct and yet produced little to no Stx2 due to gene deletions in Stx2c-encoding prophage (farm R) or insertional inactivation of stx(2a) by IS1203v (farm X). Loss of key regulatory and lysis genes in Stx2c-encoding prophage abolished stx(2c) transcription and induction of the prophage and stx(2a)::IS1203v in Stx2a-encoding prophage generated a truncated stx(2a) mRNA without affecting phage production. Stx2-producing strains were transiently present (farm R) and became Stx2 negative on farm X (i.e., stx(2a)::IS1203v). To our knowledge, this is the first study that details the evolution of E. coli O157:H7 and its Stx2-encoding prophage in a chronological collection of natural isolates. The data suggest the bovine and farm environments can be niches where Stx2-negative E. coli O157:H7 emerge and persist, which explains the Stx variability in bovine isolates and may be part of an evolutionary step toward becoming bovine specialists.