Insulators define chromosomal domains such that an enhancer in one domain cannot activate a promoter in a different domain. We show that the Drosophila gypsy insulator behaves as a cis-stimulatory element in the larval fat body. Transcriptional stimulation by the insulator is distance dependent, as expected for a promoter element as opposed to an enhancer. Stimulation of a test alcohol dehydrogenase promoter requires a binding site for a GATA transcription factor, suggesting that the insulator may be facilitating access of this DNA binding protein to the promoter. Short-range stimulation requires both the Suppressor of Hairy-wing protein and the Mod(mdg4)-62.7 protein encoded by the trithorax group gene mod(mdg4). In the absence of interaction with Mod(mdg4)-62.7, the insulator is converted into a short-range transcriptional repressor but retains some cis-stimulatory activity over longer distances. These results indicate that insulator and promoter sequences share important characteristics and are not entirely distinct. We propose that the gypsy insulator can function as a promoter element and may be analogous to promoter-proximal regulatory modules that integrate input from multiple distal enhancer sequences.The normal expression of eukaryotic genes requires stimulation of promoters by enhancers that often exert their effects over many kilobases of intervening DNA (3,54). Given this ability of enhancers to function over long distances, there must be mechanisms that prevent enhancers of one gene from activating transcription of neighboring genes. Current models propose that this is accomplished by insulators, DNA sequences that define chromosomal domains such that a promoter in one domain cannot be activated by an enhancer in a different domain (23,26). For example, the scs and scsЈ sequences that flank the Drosophila hsp70 gene prevent transcriptional stimulation by the yolk protein-1 enhancer when inserted between the enhancer and an hsp 70 target promoter (32, 56). Consistently, these same sequences insulate transgenes from the chromosomal position effects characteristic of germ line transformation in Drosophila (33). Such insulators are likely to have important roles in the correct developmental regulation of many genes as exemplified by Fab-7, which separates the iab-6 and iab-7 regulatory elements of the Drosophila Bithorax complex, and the locus control region located upstream of the chicken -globin locus (9,28,38).One of the most extensively studied insulators is located in the 5Ј nontranslated region of the Drosophila gypsy retrotransposon. Many of the spontaneous mutations caused by gypsy elements are due to the blocking of enhancer-promoter interactions attributable to this insulator (11,17,24,25,40). A 430-bp fragment of gypsy, termed "the gypsy insulator," placed between an enhancer and its target promoter is sufficient to block enhancer stimulation (11,17,24,45,51,60). As is true of other insulators, this same DNA fragment effectively insulates transgenes from chromosomal position effects (48).The...