We conducted a phylogenetic survey of the endogenous retrovirus Gypsy in the eight species of the Drosophila melanogaster subgroup. A 362-bp fragment from the integrase gene (int) was amplified, cloned, and sequenced. Phylogenetic relationships of the elements isolated from independent clones were compared with the host phylogeny. Our results indicate that two main lineages of Gypsy exist in the melanogaster subgroup and that vertical and horizontal transmission have played a crucial role in the evolution of this insect endogenous retrovirus.