We examined the genetic, morphological, and molecular effects of position effect variegation in Drosophila, and the effects of mutations that either suppress [Su(var)] or enhance [E(var)] this phenomenon. All eight Su(var) mutations examined strongly suppress the inactivation of variegating alleles of the genes white [In(l) wm4], brown [In(2R) bwVDe2] and Stubble [T(2; 3) SbV]. The E(var) mutation enhances variegation of these loci. The chromosomal region 3C-E (26 bands) which includes the white locus is usually packaged as heterochromatin in salivary glands of the variegating strain wm4. Addition of any of the Su(var) mutations restores a more euchromatic morphology to this region. In situ hybridization to polytene chromosomes and DNA blot analyses of gene copy number demonstrate that the DNA of the w+ gene is less accessible to its probe in the variegating wm4 strain than it is in the wild-type or variegation-suppressed strains. Blot analysis of larval salivary gland DNA indicates that the white gene copy number does not vary among the strains. Hence, the differences in binding of the w+ gene probe in the variegating and variegation-suppressed strains reflect differences in chromosomal packaging rather than alterations in gene number. The effects of variegation and the Su(var) mutations on chromatin structure were analyzed further by DNAse I digestion and DNA blot hybridization. In contrast to their dramatic effects on chromosomal morphology and gene expression, the Su(var) mutations had negligible effects on nuclease sensitivity of the white gene chromatin. We suggest that the changes in gene expression resulting from position effect variegation and the action of the Su(var) mutations involve alterations in chromosomal packaging.