Gene expression levels appear to be under pervasive stabilizing selection. Yet the genetic architecture underlying abundant gene expression diversity within and between populations remains elusive. Here, we investigated the role of dominance in the segregation of cis- and trans-regulation within and between populations. We used chromosome substitution lines of Drosophila melanogaster to show that (i) >70% of the genes that are differentially expressed between two homozygous lines are masked in the heterozygous, suggesting that one of the substituted chromosomes contains a recessive allele; (ii) such large masking is already obtained with heterozygous chromosomes originating from the same population, with the time of divergence between chromosomes in heterozygous lines making only a small but significant contribution to the masking of variation observed in homozygous lines; (iii) variation in gene expression due to trans-regulation is biased toward greater deviations from additivity because of recessive and dominant alleles, whereas variation due to cis-regulation shows higher additivity; and (iv) genetic divergence between second chromosomes is associated with increased cis-regulation, whereas the level of trans-regulation shows little increase over the time scale studied. Our results indicate that cis-acting alleles may be preferentially fixed by positive natural selection because of their higher additivity, and that the disruption of gene expression by recessive variation with pervasive trans-effects may be important for understanding gene expression variation within populations. We suggest that widespread regulatory effects of recessive low-frequency homozygous variation may provide a general mechanism mediating disease phenotypes and the genetic load of natural populations.