Mutations at the suppressor of Hairy-wing [su(Hw), 3-54.8] locus reverse the phenotype of second-site mutations induced by the gypsy transposable element in Drosophila melanogaster. This gene encodes a protein with a predicted molecular weight of 109,000 that contains an acidic domain and 12 copies of the DNA-binding 'Zn finger' motif. The su(Hw) protein was overexpressed in Escherichia coli and Drosophila cells, and partially purified. It was shown to interact specifically in vitro with a 367-bp DNA fragment that contains 12 copies of the sequence PyPuTTGCATACCPy located in the 5'-untranslated region of gypsy, between the 5' long terminal repeat (LTR) and the first ATG initiation codon. This sequence shows striking homology to some mammalian transcriptional enhancer elements, supporting a role for the su(Hw) protein in the control of gypsy transcription. In addition, the su(Hw) protein is present at approximately 100-200 sites on Drosophila polytene chromosomes, suggesting that it also interacts in vivo with DNA and might be involved functionally in the regulation of normal cellular genes.