Synthetic RNA is widely used in basic science, nanotechnology and therapeutics research. The vast majority of this RNA is synthesized in vitro by T7 RNA polymerase. However, the desired RNA is generally contaminated with products longer and shorter than the DNA-encoded product. To better understand these undesired byproducts and the processes that generate them, we analyzed in vitro transcription reactions using RNA-Seq as a tool. The results unambiguously confirmed that product RNA rebinds to the polymerase and self-primes (in cis) generation of a hairpin duplex, a process that favorably competes with promoter driven synthesis under high yield reaction conditions. This process is heterogeneous, both in initial priming and in the extent of priming, and already extended products can rebind for further extension, in a distributive process. In addition, we established an effective strategy to improve RNA synthesis by T7 RNA polymerase. We demonstrated that addition of a DNA oligonucleotide that is complementary to the 3’ end of the expected runoff RNA effectively prevents primer extension. Moreover, the presence of this competing capture DNA during ‘high yield’ transcription, leads to an increase in the yield of expected runoff RNA by suppressing the formation of undesired longer RNA byproducts. Additionally, replacement of uridine with pseudouridine has been used commonly in RNA therapeutics to synthesize RNA with reduced immunogenicity, however, the exact mechanism remains unclear. We investigated the impact of pseudouridine on the formation of longer RNAs by RNA-Seq. Pseudouridine reduces the formation of longer double stranded RNAs, however, the mechanism is sequence-dependent and varies based on the position of pseudouridine in RNA. In addition, we utilized RNA-Seq to determine the effect C2’-methoxyl modified nucleotide on the transcription profile, since this modification has been used to prevent the formation of n+i additions. The modified nucleotide with ribose 2’-methoxyl at the 5’ end of DNA template leads to early termination (n-1) and consequently a change in the distribution of primer extended products. Altogether, this study demonstrates the application of RNA-Seq and mechanistic enzymology to gain insight into T7 RNA polymerase and using these understandings to improve both purity and yield of RNA synthesis.