Chromatin insulators have been implicated in the regulation of higher-order chromatin structure and may function to compartmentalize the eukaryotic genome into independent domains of gene expression. To test this possibility, we used biochemical and computational approaches to identify gypsy-like genomic-binding sites for the Suppressor of Hairy-wing [Su(Hw)] protein, a component of the gypsy insulator. EMSA and FISH analyses suggest that these are genuine Su(Hw)-binding sites. In addition, functional tests indicate that genomic Su(Hw)-binding sites can inhibit enhancer-promoter interactions and thus function as bona fide insulators. The insulator strength is dependent on the genomic location of the transgene and the number of Su(Hw)-binding sites, with clusters of two to three sites showing a stronger effect than individual sites. These clusters of Su(Hw)-binding sites are located mostly in intergenic regions or in introns of large genes, an arrangement that fits well with their proposed role in the formation of chromatin domains. Taken together, these data suggest that genomic gypsy-like insulators may provide a means for the compartmentalization of the genome within the nucleus.