We undertook a deletional analysis of the gypsy retrotransposon in order to determine which sequences of the element are required for its mutagenic effect. We show that a phenotype indistinguishable from that ofy ² flies can be generated by transformingy ^– flies with a construct containing theyellow gene and a gypsy element located at the same insertion site inyellow as found iny ² flies. When flies are transformed with similar constructs in which increasing amounts of the 5 transcribed untranslated region of gypsy have been removed, either a partialy ² revertant or a completely revertant phenotype is obtained. These results yield direct proof that the region of gypsy to which thesu(Hw) protein binds is required for the generation of mutant phenotypes by this retrotransposon.