The suppressor of Hairy-wing [su(Hw)] protein mediates the mutagenic effect of the gypsy retrotransposon by repressing the function of transcriptional enhancers controlling the expression of the mutant gene. A structural and functional analysis of su(Hw) was carried out to identify domains of the protein responsible for its negative effect on enhancer action. Sequence comparison among the su(Hw) proteins from three different species allows the identification of evolutionarily conserved domains with possible functional significance. An acidic domain located in the carboxy-terminal end of the Drosophila melanogaster protein is not present in su(Hw) from other species, suggesting a nonessential role for this part of the protein. A second acidic domain located in the amino-terminal region of su(Hw) is present in all species analyzed. This domain is dispensable in the D. melanogaster protein when the carboxy-terminal acidic domain is present, but the protein is nonfunctional when both regions are simultaneously deleted. Mutations in the zinc fingers result in su(Hw) protein unable to interact with DNA in vivo, indicating a functional role for this region of the protein in DNA binding. Finally, a region of su(Hw) homologous to the leucine zipper motif is necessary for the negative effect of this protein on enhancer function, suggesting that su(Hw) might exert this effect by interacting, directly or indirectly, with transcription factors bound to these enhancers.