Three alleles of the Drosophila melanogaster vermilion (v) gene are suppressed by recessive mutations at the suppressor of sable [su(s)], gene. Previous work has established that these alleles have identical insertions of the 412 retrotransposon in the 5'-untranslated region of the gene. Despite the transposon insertion in an exon, v mutants accumulate trace amounts of apparently wild-type-sized transcripts in a su(s)+ background, and the level of v transcript accumulation is increased by su(s) mutations. Here, we have characterized transcripts from a suppressible v mutant in both su(s)+ and su(s)- backgrounds by S1 nuclease protection experiments and sequence analysis of polymerase chain reaction (PCR) generated cDNA clones. We find that transposon sequences are imprecisely eliminated from v mutant transcripts by splicing at donor and acceptor sites located near the ends of the 412 retrotransposon. Four different 5' donor sites are alternatively spliced to a single 3' acceptor site. The implications of this finding are discussed in relation to possible functions of the su(s)+ gene product