The Arabidopsis mutants far1 and fhy3 display a phenotype of reduced inhibition of hypocotyl elongation, which is specific to far-red light and therefore specific to the phytochrome A (phyA)-signaling pathway. We report that the proteins encoded by the FAR1 and FHY3 genes are both related to the transposases of type II MuDR family transposons. We demonstrate that the FAR1 protein is capable of activating transcription in Arabidopsis, indicating that it may define a type of transcriptional regulator. Using microarray expression analysis, we show that of 293 mRNAs twofold induced in wild-type Col-0 plants by continuous far-red light, 85% show reduced responsiveness in the fhy3 mutant. Notable alterations were observed in the responses of genes encoding certain transcription factors, proteins involved in cell wall extension, and proteins related to redox balance control. We also found genes, including some involved in transcriptional control, which showed altered transcriptional behavior in the dark-grown mutant plants. Taken together, our data suggest that FAR1 and FHY3 may function 'permissively' outside the signal transduction pathway of light-regulated development, yet be required for the expression of transcriptional regulatory components. An alternative possibility is that their role includes both light-signal transduction and transcriptional regulation of other genes not responsive to light. We propose that FAR1 and FHY3 control the expression of their target genes by a mechanism that has evolved directly from the way that an ancestral, MuDRA-like transposase bound to the TIRs of mobile elements.