In Drosophila miranda, females have two X1 and two evolving X2 chromosomes, and males have one of each of these two X chromosomes and a Y chromosome. In males, the homologue of the X2 chromosome, the neo-Y chromosome, is attached to the Y chromosome and is under the process of degenerative evolution. We have examined a developmentally regulated X2/neo-Y chromosome-linked gene, 549mr, of D. miranda and found that the neo-Y chromosome-linked copy of this gene (549mr-NY) contains an insertional DNA. We discovered that sequences similar to those in the insertional DNA are present in multiple copies in the genome of both sexes of D. miranda but are more abundant in the males. The insertional DNA also identified a 1.1-kilobase BamHI repeat that is present in at least 6-fold excess in the male genome as compared to the female. This BamHI repeat and similar DNA sequences are predominantly concentrated on the evolving neo-Y chromosome, but very few are found on the homologous X2 and other chromosomes. The BamHI repeat also hybridizes with 2.0- and 1.8-kb RNAs and many other RNA species, which together are also approximately 6-fold greater in males. No sequences similar to the BamHI repeat are found in Drosophila melanogaster. Moreover, the BamHI repeat is not homologous to P, copia, or other D. melanogaster transposable elements. This repeat, named the NY element, may be involved in gene disruption and the process of degenerative evolution of the neo-Y chromosome.