There is growing appreciation that gene function is connected to the dynamic structure of the chromosome. Here we explore the interplay between three-dimensional structure and transcriptional activity at the single cell level. We show that inactive loci are spatially more compact than active ones, and that within active loci the enhancer driving transcription is closest to the promoter. On the other hand, even this shortest distance is too long to support direct physical contact between the enhancer-promoter pair when the locus is transcriptionally active. Artificial manipulation of genomic separations between enhancers and the promoter produces changes in physical distance and transcriptional activity, recapitulating the correlation seen in wild-type embryos, but disruption of topological domain boundaries has no effect. Our results suggest a complex interdependence between transcription and the spatial organization of cis-regulatory elements.