How enhancers are able to activate promoters located several kilobases away is unknown. Activation by the wing margin enhancer in the cut gene, located 85 kb from the promoter, requires several genes that participate in the Notch receptor pathway in the wing margin, including scalloped, vestigial, mastermind, Chip, and the Nipped locus. Here we show that Nipped mutations disrupt one or more of four essential complementation groups: l(2)41Ae, l(2)41Af, Nipped-A, and Nipped-B. Heterozygous Nipped mutations modify Notch mutant phenotypes in the wing margin and other tissues, and magnify the effects that mutations in the cis regulatory region of cut have on cut expression. Nipped-A and l(2)41Af mutations further diminish activation by a wing margin enhancer partly impaired by a small deletion. In contrast, Nipped-B mutations do not diminish activation by the impaired enhancer, but increase the inhibitory effect of a gypsy transposon insertion between the enhancer and promoter. Nipped-B mutations also magnify the effect of a gypsy insertion in the Ultrabithorax gene. Gypsy binds the Suppressor of Hairy-wing insulator protein [Su(Hw)] that blocks enhancer-promoter communication. Increased insulation by Su(Hw) in Nipped-B mutants suggests that Nipped-B products structurally facilitate enhancer-promoter communication. Compatible with this idea, Nipped-B protein is homologous to a family of chromosomal adherins with broad roles in sister chromatid cohesion, chromosome condensation, and DNA repair.