Insulators define chromosomal domains such that an enhancer in one domain cannot activate a promoter in a different domain. We show that the Drosophila gypsy insulator behaves as a cis-stimulatory element in the larval fat body. Transcriptional stimulation by the insulator is distance dependent, as expected for a promoter element as opposed to an enhancer. Stimulation of a test alcohol dehydrogenase promoter requires a binding site for a GATA transcription factor, suggesting that the insulator may be facilitating access of this DNA binding protein to the promoter. Short-range stimulation requires both the Suppressor of Hairy-wing protein and the Mod(mdg4)-62.7 protein encoded by the trithorax group gene mod(mdg4). In the absence of interaction with Mod(mdg4)-62.7, the insulator is converted into a short-range transcriptional repressor but retains some cis-stimulatory activity over longer distances. These results indicate that insulator and promoter sequences share important characteristics and are not entirely distinct. We propose that the gypsy insulator can function as a promoter element and may be analogous to promoter-proximal regulatory modules that integrate input from multiple distal enhancer sequences.