The Drosophila melanogaster suppressor of sable gene, su(s), encodes a novel, 150-kDa nuclear RNA binding protein, SU(S), that negatively regulates RNA accumulation from mutant alleles of other genes that have transposon insertions in the 5' transcribed region. In this study, we delineated the RNA binding domain of SU(S) and evaluated its relevance to SU(S) function in vivo. As a result, we have defined two arginine-rich motifs (ARM1 and ARM2) that mediate the RNA binding activity of SU(S). ARM1 is required for in vitro high-affinity binding of SU(S) to small RNAs that were previously isolated by SELEX (binding site selection assay) and that contain a common consensus sequence. ARM1 is also required for the association of SU(S) with larval polytene chromosomes in vivo. ARM2 promotes binding of SU(S) to SELEX RNAs that lack the consensus sequence and apparently is neither necessary nor sufficient for the stable polytene chromosome association of SU(S). Use of the GAL4/UAS system to drive ectopic expression of su(s) cDNA transgenes revealed two previously unknown properties of SU(S). First, overexpression of SU(S) is lethal. Second, SU(S) negatively regulates expression of su(s) intronless cDNA transgenes, and the ARMs are required for this effect. Considering these and previous results, we propose that SU(S) binds to the 5' region of nascent transcripts and inhibits RNA production in a manner that can be overcome by splicing complex assembly.