The molecular evolution and patterns of conservation of clones from four Y chromosome lampbrush loops of Drosophila hydei were investigated. Each loop contains a discrete family of transcribed repeats that are only slightly conserved even in the hydei subgroup species. Sequencing of clones from the four D. hydei loops indicates that all transcribed repeats evolved from A+T-rich elements of the genome. Evidence is presented that suggests a Y-specific family evolved as a result of the transposition of repeated sequences from an autosomal site to the Y chromosome with the concomitant acquisition of transcriptional activity and loss of non-Y sequences. The results support a structural role for the loops in shaping a spermatocyte-specific nuclear organization. Transcribed heterochomatic sequences could play a similar role in nuclear organization in many cell types.