Retrotransposition has been well documented as a significant source of mutagenesis in diverse eukaryotic organisms, including humans. Insertions of retrotransposons within or in close proximity to transcription units cause many spontaneous mutations, and have been implicated as a source of heritable genetic defects and as a cause of carcinogenesis. The mechanisms by which retrotransposon insertions produce mutant phenotypes are diverse and, in many cases, not fully understood. A model transcriptional system was utilized to test the effects of copia retrotransposon-derived sequence insertions upon gene expression in different cellular environments. The results of these experiments indicate that retrotransposon insertions within nontranslated regions of a transcription unit inhibit gene expression by at least two concurrently acting mechanisms: 1) transcriptional interference due to an active internal promoter and, 2) trans RNA hybridization interactions between transcripts containing complementary retrotransposon sequences.