We have characterized a new X-chromosomal inversion in Drosophila melanogaster, extending from just distal of white to just proximal of the bb locus. The inversion places the w-isoxanthopterinless (wis) allele close to heterochromatin and under the influence of position-effect variegation (PEV). The wis gene activity is also regulated by chromosome pairing-dependent z1-mediated repression. By changing the environment, using specific second site modifiers, altering the amount of heterochromatin, and disturbing the chromosome pairing, we have been able to separately affect the two regulatory phenomena and analyse their respective impact on the wis regulation. We provide evidence that under normal conditions PEV and z1 mediated white repression are additive. However, at extreme levels of wis repression by PEV, changes in the z1-mediated interactions are not observable. This indicates that PEV is epistatic to z1-mediated regulation of wis. We also show that deficiencies in the short arm of Y act as suppressors of the z1-mediated white repression. This suppression does not influence PEV and is thus not due to the lower amount of heterochromatin. We propose that nonhomologous chromosome pairing between X and Y is important for the synapsis-dependent z1-mediated repression of white transcription activity in this system.