The ph(P1) allele of Drosophila melanogaster encodes a chimeric P-Ph protein that contains the DNA-binding domain of the P-element transposase and the Ph protein lacking 12 amino-terminal amino acids. It has been shown that the P-Ph protein is responsible for the formation of a repressive complex on P elements inserted at the yellow locus. Here we demonstrate that an enhancer element can suppress the P-Ph-mediated inhibition of yellow transcription. However, an increase of P-element copy number at the yellow locus overcomes the enhancer effect. The mobilization of P-element transposition induced the appearance with a high frequency of Su(y) mutations that partially or completely suppressed the inhibitory effect of ph(P1) on yellow expression. The Su(y) mutations were localized at different sites on chromosomes. One strong Su(y) mutation, sn(eP1), was found to be induced by a 1.2-kb P-element insertion into the transcribed noncoding region of the singed locus. The Su(y) mutations resulted in a high level of transcription of the 1.2-kb P element that contained the sequences encoding one DNA-binding and two protein-protein interaction domains of the transposase. The effect of Su(y) mutations can be explained by the competition between the truncated transposase encoded by a 1.2-kb P element and the P-Ph protein for binding sites on P-element insertions.