Enhancers are DNA sequences that can activate gene transcription from remote positions. In yeast, regulatory sequences that are functionally equivalent to the metazoan enhancers are called upstream activating sequences (UASs). UASs show a lower degree of flexibility than their metazoan counterparts, but can nevertheless activate transcription from a distance of >1000 bp from the promoter. One of several models for the mechanism of action of transcriptional enhancers proposes that enhancer-bound activating proteins contact promoter-bound transcription factors and thereby get in close proximity to the promoter region with concomitant looping of the intervening DNA. We tested the mode of enhancer activity in yeast. A polymerase II-transcribed gene was paired with a remote, inducible enhancer. An independent reporter system was inserted next to the promoter to monitor the potential modes of enhancer activity. Our results show that the enhancer activated the reporter system only in the presence of a functional promoter. We also demonstrate that the heterologous expression of GAGA, a factor known to facilitate DNA loop formation, allows enhancer action in yeast over a distance of 3000 bp.