Posttranscriptional gene silencing (PTGS) induced by double-stranded RNA (dsRNA) is an intriguing phenomenon that has been observed in a variety of organisms, including Drosophila melanogaster. Although PTGS in Drosophila is typically observed following direct injection of the dsRNA into embryos, it is theoretically possible that the in vivo transcription of an inverted repeat transgene might also produce a dsRNA "hairpin" that is capable of triggering PTGS. Here we test this idea, and show that an expressed inverted repeat of a portion of the sex differentiation gene, transformer-2, (tra-2), driven by a GAL4-dependent promoter, does genetically repress the endogenous wild-type tra-2 function, producing a dominant loss-of-function mutant phenotype. Remarkably, this effect is temperature-sensitive, with phenotypic consequences seen at 29 degrees, but not at 22 degrees. Moreover, by altering the dosage of either the transgenes or the endogenous tra2(+) loci, one can vary the effect over a wide range of mutant phenotypes.