The purpose of this review is to draw attention to the mechanism of dosage compensation in Drosophila as a model for the study of the regulation of gene activity through the modulation of transcription. Dosage compensation resembles some mechanisms of transcriptional regulation, found in widely divergent organisms, that do not play a role in the activation of silent genes but determine the level of activity of genes that have been induced through the action of specific activators. It differs from other known regulatory mechanisms in that its effect is to achieve, on average, a twofold change in gene activity levels. This review introduces the notion that, in order to yield such a defined level of regulation, the mechanism of dosage compensation in Drosophila, and perhaps in Caenorhabditis as well, incorporates elements that govern both transcriptional enhancement and repression within the same multi-protein regulatory complex.