Genome organization is driven by forces affecting transcriptional state, but the relationship between transcription and genome architecture remains unclear. Here, we identified the Drosophila transcription factor Motif 1 Binding Protein (M1BP) in physical association with the gypsy chromatin insulator core complex, including the universal insulator protein CP190. M1BP is required for enhancer-blocking and barrier activities of the gypsy insulator as well as its proper nuclear localization. Genome-wide, M1BP specifically colocalizes with CP190 at Motif 1-containing promoters, which are enriched at topologically associating domain (TAD) borders. M1BP facilitates CP190 chromatin binding at many shared sites and vice versa. Both factors promote Motif 1-dependent gene expression and transcription near TAD borders genome-wide. Finally, loss of M1BP reduces chromatin accessibility and increases both inter- and intra-TAD local genome compaction. Our results reveal physical and functional interaction between CP190 and M1BP to activate transcription at TAD borders and mediate chromatin insulator-dependent genome organization.