Campylobacter jejuni is a leading cause of food-borne illness. Although a natural reservoir of the pathogen is domestic poultry, the degree of genomic diversity exhibited by the species limits the application of epidemiological methods to trace specific infection sources. Bacteriophage predation is a common burden placed upon C. jejuni populations in the avian gut, and we show that amongst C. jejuni that survive bacteriophage predation in broiler chickens are bacteriophage-resistant types that display clear evidence of genomic rearrangements. These rearrangements were identified as intra-genomic inversions between Mu-like prophage DNA sequences to invert genomic segments up to 590 kb in size, the equivalent of one-third of the genome. The resulting strains exhibit three clear phenotypes: resistance to infection by virulent bacteriophage, inefficient colonisation of the broiler chicken intestine, and the production of infectious bacteriophage CampMu. These genotypes were recovered from chickens in the presence of virulent bacteriophage but not in vitro. Reintroduction of these strains into chickens in the absence of bacteriophage results in further genomic rearrangements at the same locations, leading to reversion to bacteriophage sensitivity and colonisation proficiency. These findings indicate a previously unsuspected method by which C. jejuni can generate genomic diversity associated with selective phenotypes. Genomic instability of C. jejuni in the avian gut has been adopted as a mechanism to temporarily survive bacteriophage predation and subsequent competition for resources, and would suggest that C. jejuni exists in vivo as families of related meta-genomes generated to survive local environmental pressures.