We have marked a cloned Drosophila transposable element--the I element--with an engineered neomycin-containing indicator gene, whose expression is conditioned by passage of the transposon through an RNA intermediate. Mobility of the marked element introduced into Drosophila as a transgene could be detected in vivo, upon in toto selection of developing embryos on G418-containing medium. For resistant individuals, Southern blot analysis and nucleotide sequencing after PCR amplification disclosed transposition of the marked element into new loci, with target site duplications and splicing out of the intron in the indicator gene. It demonstrates that the I element, which is closely related to the widespread mammalian LINEs, transposes through an RNA intermediate, as up to now only conjectured from sequence singularities of this class of 'non-viral retrotransposons'. The developed indicator gene provides a potent new genetic tool for detection and quantitative analysis of retrotransposon mobility and its regulation as it occurs in vivo.