Many mutations in Drosophila melanogaster are gypsy retrotransposon insertions. Gypsy binds the protein (SUHW) encoded by the suppressor of Hairy-wing [su(Hw)] gene, and SUHW alters expression of surrounding genes. When gypsy is between an enhancer and promoter, SUHW blocks activation of transcription by the enhancer. Additionally, when gypsy is downstream of a promoter in a parallel orientation, SUHW increases truncation of transcripts at the poly(A) site in the gypsy 5' long terminal repeat, thereby decreasing the gene transcript levels. The effects of SUHW appear to involve fundamental and general mechanisms controlling gene expression because SUHW potentiates other poly(A) sites and blocks several enhancers in Drosophila. To investigate these mechanisms, SUHW was expressed in Saccharomyces cerevisiae. Although SUHW enters the nucleus and binds DNA in yeast, it has surprisingly minor effects on utilization of the CYC1 poly(A) site and transcription activation by a GAL upstream activation sequence. These observations indicate that the observed effects of SUHW on gene expression in Drosophila require specific interactions with other factors that are absent or unrecognizable in yeast.