Maize transposable elements, when inserted in or near genes, alter expression by several transcriptional and post-transcriptional mechanisms. Three independent, unstable insertions of the transposable element Mutator (Mu) into the first intron of the Alcohol dehydrogenase-1 (Adh1) gene have been shown to decrease expression [Strommer et al. (1982). Nature 300, 542-544]. We have developed an approach to elucidate the underlying molecular mechanisms responsible for the mutant phenotypes. Mu1 elements were inserted into Adh1-S intron 1 in vitro to create plasmid facsimiles of the mutant alleles. The Mu1 element was also inserted at novel positions within intron 1 to create new mutations. The Mu1/intron constructions were placed between the Adh1-S promoter/exon 1 segment and a reporter gene (firefly luciferase or beta-glucuronidase), and these chimeric gene constructs were tested in transient assays in maize protoplasts. When compared with the appropriate control, the Mu1 insertions decreased reporter gene expression to levels approximating the alcohol dehydrogenase enzyme activities observed for the Adh1-S mutants in vivo. The Mu1 insertions also showed a polarity effect with luciferase expression increasing as the insertions were placed nearer the 3' splice junction. In addition, Mu1 insertions within a different intron, actin intron 3, also significantly reduced luciferase expression, indicating that Mu1 insertions within introns are likely to diminish expression in many genes. The presence of the Mu1 sequences was correlated with decreased levels of steady-state luciferase transcript. Deletion analysis of the Mu1 element and RNase mapping indicate that the transposable element contains RNA processing signals in its central region that are largely responsible for the decrease in expression.