We report here a method for the in vivo dissection of the regulatory region of a gene in the Drosophila genome. Our system includes (i) the reporter genes lacZ and white to detect transcriptional enhancer and silencer activities in a target gene, (ii) an efficient way to induce integration of gypsy elements in the genome, and (iii) unidirectional blocking of regulatory activities by the gypsy element, which is dependent on the su(Hw) protein. The optomotor-blind (omb) gene was analyzed. In the omb(P1) line, a P[lacW] construct is inserted about 1.4 kb upstream of the omb transcription start site. The lacZ reporter gene within P[lacW] exhibits the same expression pattern as omb. The white reporter gene is expressed in a "bipolar" pattern. We induced high frequency gypsy mobilization in omb(P1) and identified two lines (D11 and D13-1) with altered eye pigmentation pattern, which is dependent on su(Hw) activity. A gypsy element was found inserted in the first intron of omb in D13-1 and in P[lacW] in D11. These results indicate that it is the blocking of regulatory activities by gypsy that caused the changes in the white reporter gene expression. The effect of these gypsy insertions on the expression patterns allowed us to predict several aspects of the organization of the regulatory elements in the omb locus.