The maize (Zea mays) mutant Unstable factor for orange1 (Ufo1) has been implicated in the epigenetic modifications of pericarp color1 (p1), which regulates the production of the flavonoid pigments phlobaphenes. Here, we show that the ufo1 gene maps to a genetically recalcitrant region near the centromere of chromosome 10. Transcriptome analysis of Ufo1-1 mutant and wild-type plants identified a candidate gene in the mapping region using a comparative sequence-based approach. The candidate gene, GRMZM2G053177, is overexpressed by <45-fold in multiple tissues of Ufo1-1, explaining the dominance of Ufo1-1 and its phenotypes. In the mutant stock, GRMZM2G053177 has a unique transcript originating within a CACTA transposon inserted in its first intron, and it is missing the first four codons of the wild-type transcript. GRMZM2G053177 expression is regulated by the DNA methylation status of the CACTA transposon, explaining the incomplete penetrance and poor expressivity of Ufo1-1. Transgenic overexpression lines of GRMZM2G053177 (Ufo1-1) phenocopy the p1-induced pigmentation in coleoptiles, tassels, leaf sheaths, husks, pericarps, and cob glumes. Transcriptome analysis of Ufo1 versus wild-type tissues revealed changes in several pathways related to abiotic and biotic stress. Thus, this study addresses the enigma of Ufo1 identity in maize, which had gone unsolved for more than 50 years.