Parasegmental (PS)-specific expression of the homeotic genes of the bithorax-complex (BX-C) appears to depend upon the subdivision of the complex into a series of functionally independent cis-regulatory domains. Fab-7 is a regulatory element that lies between iab-6 and iab-7 (the PS11- and PS12-specific cis-regulatory domains, respectively). Deletion of Fab-7 causes ectopic expression of iab-7 in PS11 (where normally only iab-6 is active). Two models have been proposed to account for the dominant Fab-7 phenotype. The first considers that Fab-7 functions as a boundary element that insulates iab-6 and iab-7. The second model envisages that Fab-7 contains a silencer element that keeps iab-7 repressed in parasegments anterior to PS12. Using a P-element inserted in the middle of the Fab-7 region (the bit transposon), we have generated an extensive collection of new Fab-7 mutations that allow us to subdivide Fab-7 into a boundary element and a Polycomb-respond element (PRE). The boundary lies within 1 kb of DNA on the proximal side of the bit transposon (towards iab-6). Deletions removing this element alone cause a complex gain- and loss-of-function phenotype in PS11; in some groups of cells, both iab-6 and iab-7 are active, while in others both iab-6 and iab-7 are inactive. Thus, deletion of the boundary allows activating as well as repressing activities to travel between iab-6 and iab-7. We also provide evidences that the boundary region contains an enhancer blocker element. The Polycomb-response element lies within 0.5 kb of DNA immediately distal to the boundary (towards iab-7). Deletions removing the PRE alone do not typically cause any visible phenotype as homozygotes. Interestingly, weak ectopic activation of iab-7 is observed in hemizygous PRE deletions, suggesting that the mechanisms that keep iab-7 repressed in the absence of this element may depend upon chromosome pairing. These results help to reconcile the previously contradictory models on Fab-7 function and to shed light on how a chromatin domain boundary and a nearby PRE concur in the setting up of the appropriate PS-specific expression of the Abd-B gene of the BX-C.