We provide evidence that a prokaryotic insertion sequence (IS) element is active in a vertebrate system. The transposase of Escherichia coli element IS30 catalyzes both excision and integration in extrachromosomal DNA in zebrafish embryos. The transposase has a pronounced target preference, which is shown to be modified by fusing the enzyme to unrelated DNA binding proteins. Joining the transposase to the cI repressor of phage lambda causes transposition primarily into the vicinity of the lambda operator in E. coli, and linking to the DNA binding domain of Gli1 also directs the recombination activity of transposase near to the Gli1 binding site in zebrafish. Our results demonstrate the possibility of fusion transposases to acquire novel target specificity in both prokaryotes and eukaryotes.