Chromatin insulators are widely distributed in the genome and mediate formation of chromatin loops, but their roles in gene regulation remain poorly understood. The complex expression pattern of the Drosophila homeotic gene Sex combs reduced (Scr) is directed by an unusually long regulatory sequence harboring diverse cis elements and an intervening neighbor gene fushi tarazu (ftz). In this project, we identified the SF2 insulator between the ftz gene downstream enhancer and the Scr enhancers in the distal region. Both SF1 and SF2 locate precisely at the boundaries of polycomb-mediated silent chromatin domains and known insulator proteins bind to both SF1 and SF2 in 0-12 fly embryos as well as cell lines from different developmental origins. 3C experiments showed that interaction between SF1 and SF2 is developmentally regulated. By using a transgene assay, we showed that SF2 has strong enhancer blocking activity and pairing of SF1 and SF2 cancels enhancer blocking activity in an orientation dependent manner. We also demonstrated that both SF1 and SF2 insulators are functionally conserved in distantly diverged Drosophila species. CRISPR-Cas9 mediated knockout of SF1 or SF2 not only leads to the misregulation of Scr and ftz genes, but also affected stage- and tissue-specific chromatin architecture in the Antennapedia complex. Flies with SF1 or SF2 deletion have significantly reduced overall-fitness during development.SF1 and SF2 flank an evolutionarily inverted ftz gene unit in the genus of Drosophila. The breakpoints of this inversion map immediately to the inner sides of the loop anchor sites. We further demonstrated the precise matching of independent inversion breakpoints and insulator sites at the Dfd Hox gene locus. Both pairs of insulator sites form long-range chromatin loops in Drosophila embryos and their homologs from distantly related Drosophila species also show conserved insulator activity. Through genome wide analysis, we further demonstrated the precise association between evolutionary breakpoints and chromatin insulator sites in several Drosophila species that diverged from Drosophila melanogaster 15 to 60 million years ago. Together, we provide evidence that chromatin insulator formed loops may contribute both to the formation and fixation of evolutionary rearrangement.