A previously described genetic system comprising a Mutator Strain (MS) and the Stable Strain (SS) from which it originated is characterized by genetic instability caused by transpositions of the retrotransposon gypsy. A series of genetic crosses was used to obtain three MS derivatives, each containing one MS chromosome (X, 2 or 3) in the environment of SS chromosomes. All derivatives are characterized by elevated frequencies of spontaneous mutations in both sexes. Mutations appear at the premeiotic stage and are unstable. Transformed derivatives of SS and another stable strain 208 were obtained by microinjection of plasmid DNA containing transpositionally active gypsy inserted into the Casper vector. In situ hybridization experiments revealed amplification and active transposition of gypsy in SS derivatives, while the integration of a single copy of gypsy into the genome of 208 does not change the genetic properties of this strain. We propose that genetic instability in the MS system is caused by the combination of two factors: mutation(s) in gene(s) regulating gypsy transposition in SS and its MS derivatives, and the presence of transpositionally active gypsy copies in MS but not SS.