Of the several noncoding transcripts produced by the hsromega gene of Drosophila melanogaster, the nucleus-limited >10-kb hsromega-n transcript colocalizes with heterogeneous nuclear RNA binding proteins (hnRNPs) to form fine nucleoplasmic omega speckles. Our earlier studies suggested that the noncoding hsromega-n transcripts dynamically regulate the distribution of hnRNPs in active (chromatin bound) and inactive (in omega speckles) compartments. Here we show that a P transposon insertion in this gene's promoter (at -130 bp) in the hsromega05421; enhancer-trap line had no effect on viability or phenotype of males or females, but the insertion-homozygous males were sterile. Testes of hsromega05421; homozygous flies contained nonmotile sperms while their seminal vesicles were empty. RNA:RNA in situ hybridization showed that the somatic cyst cells in testes of the mutant male flies contained significantly higher amounts of hsromega-n transcripts, and unlike the characteristic fine omega speckles in other cell types they displayed large clusters of omega speckles as typically seen after heat shock. Two of the hnRNPs, viz. HRB87F and Hrb57A, which are expressed in cyst cells, also formed large clusters in these cells in parallel with the hsromega-n transcripts. A complete excision of the P transposon insertion restored male fertility as well as the fine-speckled pattern of omega speckles in the cyst cells. The in situ distribution patterns of these two hnRNPs and several other RNA-binding proteins (Hrp40, Hrb57A, S5, Sxl, SRp55 and Rb97D) were not affected by hsromega mutation in any of the meiotic stages in adult testes. The present studies, however, revealed an unexpected presence (in wild-type as well as mutant) of the functional form of Sxl in primary spermatocytes and an unusual distribution of HRB87F along the retracting spindle during anaphase telophase of the first meiotic division. It appears that the P transposon insertion in the promoter region causes a misregulated overexpression of hsromega in cyst cells, which in turn results in excessive sequestration of hnRNPs and formation of large clusters of omega speckles in these cell nuclei. The consequent limiting availability of hnRNPs is likely to trans-dominantly affect processing of other pre-mRNAs in cyst cells. We suggest that a compromise in the activity of cyst cells due to the aberrant hnRNP distribution is responsible for the failure of individualization of sperms in hsromega05421; mutant testes. These results further support a significant role of the noncoding hsromega-n transcripts in basic cellular activities, namely regulation of the availability of hnRNPs in active (chromatin bound) and inactive (in omega speckles) compartments.