Background The two-step transposition pathway of insertion sequences of the IS3 family, and several other families, involves first the formation of a branched figure-of-eight (F-8) structure by an asymmetric single strand cleavage at one optional donor end and joining to the flanking host DNA near the target end. Its conversion to a double stranded minicircle precedes the second insertional step, where both ends function as donors. In IS2, the left end which lacks donor function in Step I acquires it in Step II. The assembly of two intrinsically different protein-DNA complexes in these F-8 generating elements has been intuitively proposed, but a barrier to testing this hypothesis has been the difficulty of isolating a full length, soluble and active transposase that creates fully formed synaptic complexes in vitro with protein bound to both binding and catalytic domains of the ends. We address here a solution to expressing, purifying and structurally analyzing such a protein. Results A soluble and active IS2 transposase derivative with GFP fused to its C-terminus functions as efficiently as the native protein in in vivo transposition assays. In vitro electrophoretic mobility shift assay data show that the partially purified protein prepared under native conditions binds very efficiently to cognate DNA, utilizing both N- and C-terminal residues. As a precursor to biophysical analyses of these complexes, a fluorescence-based random mutagenesis protocol was developed that enabled a structure-function analysis of the protein with good resolution at the secondary structure level. The results extend previous structure-function work on IS3 family transposases, identifying the binding domain as a three helix H + HTH bundle and explaining the function of an atypical leucine zipper-like motif in IS2. In addition gain- and loss-of-function mutations in the catalytic active site define its role in regional and global binding and identify functional signatures that are common to the three dimensional catalytic core motif of the retroviral integrase superfamily. Conclusions Intractably insoluble transposases, such as the IS2 transposase, prepared by solubilization protocols are often refractory to whole protein structure-function studies. The results described here have validated the use of GFP-tagging and fluorescence-based random mutagenesis in overcoming this limitation at the secondary structure level.