Several distinct activities and functions have been described for chromatin insulators, which separate genes along chromosomes into functional units. Here, we describe a novel mechanism of functional separation whereby an insulator prevents gene repression. When thehomieinsulator is deleted from the end of a Drosophilaeven skipped(eve) locus, a flanking P-element promoter is activated in a partialevepattern, causing expression driven by enhancers in the 3’ region to be repressed. The mechanism involves transcriptional read-through from the flanking promoter. This conclusion is based on the following. Read-through driven by a heterologous enhancer is sufficient to repress, even whenhomieis in place. Furthermore, when the flanking promoter is turned around, repression is minimal. Transcriptional read-through that does not produce anti-sense RNA can still repress expression, ruling out RNAi as the mechanism in this case. Thus, transcriptional interference, caused by enhancer capture and read-through when the insulator is removed, repressesevepromoter-driven expression. We also show that enhancer-promoter specificity and processivity of transcription can have decisive effects on the consequences of insulator removal. First, a coreheat shock 70promoter that is not activated well byeveenhancers did not cause read-through sufficient to repress theevepromoter. Second, these transcripts are less processive than those initiated at the P-promoter, measured by how far they extend through theevelocus, and so are less disruptive. These results highlight the importance of considering transcriptional read-through when assessing the effects of insulators on gene expression.