The C-terminal CAAX motif of the yeast mating factors is modified by proteolysis to remove the three terminal amino acids (-AAX) leaving a C-terminal cysteine resi-, due that is polylsoprenylated and carboxyl-methylated. Here we show that all ras proteins are polyisoprenylated on their C-terminal cystelne (Cysl86). Mutational analysis shows palmltoylation does not take place on CyslSS as pfwlously thought but on cysteine residues conWined in the hypenmrlable domain of some ras proteins. The major expressed form of cK-ras (exon 48) does not have a cysteine residue immediately upstream of CyslSS and is not palmitoylated. Polylsoprenylated but nonpalmitoylated H-MS proteins are biologically active and associate weakly with cell membranes. Palmitoylation increases the avidity of this binding and enhances their transforming activity. Polyisoprenylation is essential for biological activity as inhibiting the biosynthesis of polyisoprenoids abolishes membrane association of p21 ms.