T7 RNA polymerase (T7 RNAP) is one of the simplest known RNA polymerases. Its unique structural features make it a critical model for studying the mechanisms of RNA synthesis. This review systematically examines the static crystal structure of T7 RNAP, beginning with an in-depth examination of its characteristic “thumb”, “palm”, and “finger” domains, which form the classic “right-hand-like” architecture. By detailing these structural elements, this review establishes a foundation for understanding the overall organization of T7 RNAP. This review systematically maps the functional roles of secondary structural elements and their subdomains in transcriptional catalysis, progressively elucidating the fundamental relationships between structure and function. Further, the intrinsic flexibility of T7 RNAP and its applications in research are also discussed. Additionally, the review presents the structural diagrams of the enzyme at different stages of the transcription process, and through these diagrams, it provides a detailed description of the complete transcription process of T7 RNAP. By integrating structural dynamics and kinetics analyses, the review constructs a comprehensive framework that bridges static structure to dynamic processes. Despite its advantages, T7 RNAP has a notable limitation: it generates double-stranded RNA (dsRNA) as a byproduct. The presence of dsRNA not only compromises the purity of mRNA products but also elicits nonspecific immune responses, which pose significant challenges for biotechnological and therapeutic applications. The review provides a detailed exploration of the mechanisms underlying dsRNA formation during T7 RNAP catalysis, reviews current strategies to mitigate this issue, and highlights recent progress in the field. A key focus is the semi-rational design of T7 RNAP mutants engineered to minimize dsRNA generation and enhance catalytic performance. Beyond its role in transcription, T7 RNAP exhibits rapid development and extensive application in fields, including gene editing, biosensing, and mRNA vaccines. This review systematically examines the structure-function relationships of T7 RNAP, elucidates the mechanisms of dsRNA formation, and discusses engineering strategies to optimize its performance. It further explores the engineering optimization and functional expansion of T7 RNAP. Furthermore, this review also addresses the pressing issues that currently need resolution, discusses the major challenges in the practical application of T7 RNAP, and provides an outlook on potential future research directions. In summary, this review provides a comprehensive analysis of T7 RNAP, ranging from its structural architecture to cutting-edge applications. We systematically examine: (1) the characteristic right-hand domains (thumb, palm, fingers) that define its minimalistic structure; (2) the structure-function relationships underlying transcriptional catalysis; and (3) the dynamic transitions during the complete transcription cycle. While highlighting T7 RNAP’s versatility in gene editing, biosensing, and mRNA vaccine production, we critically address its major limitation—dsRNA byproduct formation—and evaluate engineering solutions including semi-rationally designed mutants. By synthesizing current knowledge and identifying key challenges, this work aims to provide novel insights for the development and application of T7 RNAP and to foster further thought and progress in related fields.