The gypsy (mdg4) mobile element of Drosophila contains two closely spaced regions which bind proteins from nuclear extracts. One of these is an imperfect palindrome having homology with the lac-operator of Escherichia coli; the other contains a reiterated sequence (5'PyPuT/C TGCATAC/TPyPy) homologous to the octamer that is the core of many enhancers and upstream promoter elements. Transient expression of deletion mutants has shown that these DNA regions are negative and positive regulators of transcription. As was demonstrated earlier by other authors, mutations induced by the presence of gypsy in different loci are suppressed owing to either repression or activation of gypsy transcription in Drosophila strains carrying unlinked mutations in su(Hw) or su(f) genes. We have shown that binding to a negative regulator (silencer) is weakened in nuclear extracts isolated from fly stocks carrying su(f) mutations which activate gypsy transcription; therefore the su(f) gene seems to code for a protein capable of gypsy repression. Furthermore, binding to a positive regulator is weakened in nuclear extracts isolated from fly stocks carrying su(Hw) gene mutations which decrease the level of gypsy transcription; therefore, the su(Hw) gene most likely encodes a protein which activates gypsy transcription.