The small fourth chromosome of Drosophila melanogaster (3.5% of the genome) presents a puzzle. Cytological analysis suggests that the bulk of the fourth, including the portion that appears banded in the polytene chromosomes, is heterochromatic; the banded region includes blocks of middle repetitious DNA associated with heterochromatin protein 1 (HP1). However, genetic screens indicate 50-75 genes in this region, a density similar to that in other euchromatic portions of the genome. Using a P element containing an hsp70-white gene and a copy of hsp26 (marked with a fragment of plant DNA designated pt), we have identified domains that allow for full expression of the white marker (R domains), and others that induce a variegating phenotype (V domains). In the former case, the hsp26-pt gene shows an accessibility and heat-shock-inducible activity similar to that seen in euchromatin, whereas in the latter case, accessibility and inducible expression are reduced to levels typical of heterochromatin. Mapping by in situ hybridization and by hybridization of flanking DNA sequences to a collection of cosmid and bacterial artificial chromosome clones shows that the R domains (euchromatin-like) and V domains (heterochromatin-like) are interspersed. Examination of the effect of genetic modifiers on the variegating transgenes shows some differences among these domains. The results suggest that heterochromatic and euchromatic domains are interspersed and closely associated within this 1.2-megabase region of the genome.