The phase behavior of the anionic surfactant sodium dodecyl sulfate (SDS) in the presence of the strongly binding counterion p-toluidine hydrochloride (PTHC) has been examined using small-angle X-ray diffraction and polarizing microscopy. A hexagonal-to-lamellar transition on varying the PTHC to SDS molar ratio (α) occurs through a nematic phase of rodlike micelles (N C) → isotropic (I) → nematic of disklike micelles (N D) at a fixed surfactant concentration (φ). The lamellar phase is found to coexist with an isotropic phase (I′) over a large region of the phase diagram. Deuterium nuclear magnetic resonance investigations of the phase behavior at φ = 0.4 confirm the transition from NC to N D on varying α. The viscoelastic and flow behaviors of the different phases were examined. A decrease in the steady shear viscosity across the different phases with increasing a suggests a decrease in the aspect ratio of the micellar aggregates. From the transient shear stress response of the NC and ND nematic phases in step shear experiments, they were characterized to be tumbling and flow aligning, respectively. Our studies reveal that by tuning the morphology of the surfactant micelles strongly binding counterions modify the phase behavior and rheological properties of concentrated surfactant solutions. © 2009 American Chemical Society.