We have used DNase I footprinting and partially fractionated nuclear extracts from Drosophila Kc tissue culture cells to identify DNA-binding proteins that interact with the terminal repeats of P transposable elements. We have identified a binding activity that interacts specifically with a region of the 31-base-pair terminal inverted repeats that is directly adjacent to the duplication of target site DNA. Binding occurs to both the 5' and 3' inverted terminal repeats irrespective of the sequence of the duplicated target DNA. UV photochemical crosslinking studies suggest that the binding activity resides in a polypeptide of 65-70 kDa. Biochemical fractionation and oligonucleotide affinity chromatography have been used to purify the binding activity to near homogeneity and identify a polypeptide of 66 kDa in the highly purified preparations. The site to which binding occurs is included in a region absolutely required for P element transposition, suggesting that this binding protein may be a cellular factor involved in P element transposition.