The mechanism underlying enhancer-blocking by insulators is unclear. We explored the activity of human beta-globin HS5, the orthologue of the CTCF-dependent chicken HS4 insulator. An extra copy of HS5 placed between the beta-globin locus control region (LCR) and downstream genes on a transgene fulfills the classic predictions for an enhancer-blocker. Ectopic HS5 does not perturb the LCR but blocks gene activation by interfering with RNA pol II, activator and coactivator recruitment, and epigenetic modification at the downstream beta-globin gene. Underlying these effects, ectopic HS5 disrupts chromatin loop formation between beta-globin and the LCR, and instead forms a new loop with endogenous HS5 that topologically isolates the LCR. Both enhancer-blocking and insulator-loop formation depend on an intact CTCF site in ectopic HS5 and are sensitive to knock-down of the CTCF protein by siRNA. Thus, intrinsic looping activity of CTCF sites can nullify LCR function.