Understanding the molecular mechanisms that influence transposable element target site preferences is a fundamental challenge in functional and evolutionary genomics. Large-scale transposon insertion projects provide excellent material to study target site preferences in the absence of confounding effects of post-insertion evolutionary change. Growing evidence from a wide variety of prokaryotes and eukaryotes indicates that DNA transposons recognize staggered-cut palindromic target site motifs (TSMs). Here, we use over 10 000 accurately mapped P-element insertions in the Drosophila melanogaster genome to test predictions of the staggered-cut palindromic target site model for DNA transposon insertion. We provide evidence that the P-element targets a 14-bp palindromic motif that can be identified at the primary sequence level, which predicts the local spacing, hotspots and strand orientation of P-element insertions. Intriguingly, we find that the although P-element destroys the complete 14-bp target site upon insertion, the terminal three nucleotides of the P-element inverted repeats complement and restore the original TSM, suggesting a mechanistic link between transposon target sites and their terminal inverted repeats. Finally, we discuss how the staggered-cut palindromic target site model can be used to assess the accuracy of genome mappings for annotated P-element insertions.