Evidence from in situ hybridizations of DNA from the transposable element hobo to polytene salivary gland chromosome squashes reveals that hobo occupies both cytological breakpoints of three of four endemic inversions sampled from natural populations of Drosophila melanogaster in the Hawaiian islands. The fourth endemic inversion has a single hobo insert at one breakpoint. Cosmopolitan inversions on the same chromosomes do not show this association. Frequencies of both endemic and cosmopolitan inversions in Hawaiian populations fall in ranges typical for natural populations of D. melanogaster sampled worldwide, suggesting that these results may be typical of other regions besides Hawaii. This appears to be the first direct demonstration that transposable elements are responsible for causing specific rearrangements found in nature; consequently, it is also the first direct demonstration that chromosome rearrangements can arise in nature in a manner predicted by results of hybrid dysgenic crosses in the laboratory. Possible population genetic and evolutionary consequences are discussed.