The anterobithorax (abx) and bithorax (bx) genes together direct the development of the posterior second and anterior third thoracic segments of the fruit fly. We have characterized the phenotypes and DNA lesions of 19 abx and bx alleles. abx and bx mutations differ both in the nature and location of their DNA lesions, forming two clusters within a relatively small region of the Ultrabithorax transcription unit. Correlation between phenotype and DNA lesion suggests the presence of two or more genetic elements in this region distinct from the Ultrabithorax transcript. Mutant transformations do not strictly obey segmental or parasegmental boundaries. Most of the bx mutations result from insertions of the mobile element gypsy. The strength of these alleles varies in a regular way dependent on the position and orientation of the gypsy element. We propose models for gypsy element action and bithorax complex expression in the light of these results.