The R-sc gene of maize is a member of the R gene family of transcriptional activators that regulate anthocyanin biosynthesis. A derivative of R-sc, r-m9 conditions a reduced level of aleurone pigmentation due to the presence of a 2.1-kb Ds insertion near the 3' end of the coding region. Excision of Ds from r-m9 leaves a 7-bp insertion in the darker but still mutant v24 derivative. Both the 7-bp insertion in v24 and the 2.1-kb Ds in r-m9 are predicted to truncate their respective R proteins proximal to the carboxyl terminus, which was shown previously to contain one of three nuclear localization sequences. We find that the reduced expression of r-m9 and v24 are not due to mRNA or protein instability, but most likely reflect the inefficient localization of truncated R proteins to the nucleus. To our knowledge this is the first example of a transposable element insertion that alters gene expression by affecting nuclear localization. In addition, our data indicate that the carboxyl terminus of the R protein is far more important than previously suspected and illustrates the utility of natural mutations for defining functional domains in proteins.