Shep RNA-binding capacity is required for antagonism of gypsy chromatin insulator activity

Chromatin insulators are DNA-protein complexes that regulate chromatin structure and gene expression in a wide range of organisms. These complexes also harbor enhancer blocking and barrier activities. Increasing evidence suggests that RNA molecules are integral components of insulator complexes. However, how these RNA molecules are involved in insulator function remains unclear. The Drosophila RNA-binding protein Shep associates with the gypsy insulator complex and inhibits insulator activities. By mutating key residues in the RRM domains, we generated a Shep mutant protein incapable of RNA-binding, and this mutant lost the ability to inhibit barrier activity. In addition, we found that one of many wildtype Shep isoforms but not RRM mutant Shep was sufficient to repress enhancer blocking activities. Finally, wildtype Shep rescued synthetic lethality of shep, mod(mdg4) double-mutants and developmental defects of shep mutant neurons, whereas mutant Shep failed to do so. These results indicate that the RNA-binding ability of Shep is essential for its ability to antagonize insulator activities and promote neuronal maturation. Our findings suggest that regulation of insulator function by RNA-binding proteins relies on RNA-mediated interactions.