Bacteriophage T7 RNA polymerase (T7 RNAP) is widely used for synthesizing RNA molecules with synthetic modifications and unnatural base pairs (UBPs) for a variety of biotechnical and therapeutic applications. However, the molecular basis of transcription recognition of UBPs by T7 RNAP remains poorly understood. Here we focused on a representative UBP, 7-(2-thienyl)-imidazo[4,5-b]pyridine (Ds) and pyrrole 2-carbaldehyde (Pa), and investigated how the hydrophobic Ds-Pa pair is recognized by T7 RNAP. Our kinetic assays revealed that T7 RNAP selectively recognizes the Ds or Pa base in the templates and preferentially incorporates their cognate unnatural base nucleotide substrate (PaTP or DsTP) over natural NTPs. Our structural studies reveal that T7 RNAP recognizes the unnatural substrates at the pre-insertion state in a distinct manner compared to natural substrates. These results provide mechanistic insights into transcription recognition of UBP by T7 RNAP and provide valuable information for designing the next generation of UBPs.