How to improve INSERT INTO ... SELECT locking behavior

You can set binlog format like that:

SET GLOBAL binlog_format = 'ROW';

Edit my.cnf if you want to make if permanent:

[mysqld]
binlog_format=ROW

Set isolation level for the current session before you run your query:

SET SESSION TRANSACTION ISOLATION LEVEL READ UNCOMMITTED;
INSERT INTO t1 SELECT ....;

If this doesn't help you should try setting isolation level server wide and not only for the current session:

SET GLOBAL TRANSACTION ISOLATION LEVEL READ UNCOMMITTED;

Edit my.cnf if you want to make if permanent:

[mysqld]
transaction-isolation = READ-UNCOMMITTED

You can change READ-UNCOMMITTED to READ-COMMITTED which is a better isolation level.

The answer to this question is much easier now: - Use Row Based Replication and Read Committed isolation level.

The locking you were experiencing disappears.

Longer explaination: http://harrison-fisk.blogspot.com/2009/02/my-favorite-new-feature-of-mysql-51.html