P elements are a family of mobile DNA elements found in Drosophila. P-element transposition is tightly regulated, and P-element-encoded repressor proteins are responsible for inhibiting transposition in vivo. To investigate the molecular mechanisms by which one of these repressors, the KP protein, inhibits transposition, a variety of mutant KP proteins were prepared and tested for their biochemical activities. The repressor activities of the wild-type and mutant KP proteins were tested in vitro using several different assays for P-element transposase activity. These studies indicate that the site-specific DNA-binding activity of the KP protein is essential for repressing transposase activity. The DNA-binding domain of the KP repressor protein is also shared with the transposase protein and resides in the N-terminal 88 amino acids. Within this region, there is a C2HC putative metal-binding motif that is required for site-specific DNA binding. In vitro the KP protein inhibits transposition by competing with the transposase enzyme for DNA-binding sites near the P-element termini.