We report multiple cases in which disruption of hsp70 regulatory regions by transposable element (TE) insertions underlies natural variation in expression of the stress-inducible molecular chaperone Hsp70 in Drosophila melanogaster. Three D. melanogaster populations from different continents are polymorphic for jockey or P element insertions in the promoter of the hsp70Ba gene. All three TE insertions are within the same 87-bp region of hsp70Ba promoter, and we suggest that the distinctive promoter architecture of hsp genes may make them vulnerable to TE insertions. Each of the TE insertions reduces Hsp70 levels, and RNase protection assays demonstrate that such insertions can reduce transcription of the hsp70Ba gene. In addition, the TEs alter two measures of organismal fitness, inducible thermotolerance and female reproductive success. Thus, transposition can create quantitative genetic variation in gene expression within populations, on which natural selection can act.