Ras GTPases undergo post-translational modifications that govern their subcellular trafficking and localization. In particular, palmitoylation of the Golgi tags N-Ras and H-Ras for exocytotic transport and residency at the PM (plasma membrane). Following depalmitoylation, PM-Ras redistributes to all subcellular membranes causing an accumulation of palmitate-free Ras at endomembranes, including the Golgi and endoplasmic reticulum. Palmitoylation is unanimously regarded as a critical modification at the crossroads of Ras activity and trafficking control, but its precise relevance to native wild-type Ras function in growth factor signalling is unknown. We show in the present study by use of palmitoylation-deficient N-Ras mutants and via the analysis of palmitate content of agonist-activated GTP-loaded N-Ras that only palmitoylated N-Ras becomes activated by agonists. In line with an essential role of palmitoylation in Ras activation, dominant-negative RasS17N loses its blocking potency if rendered devoid of palmitoylation. Live-cell Ras–GTP imaging shows that N-Ras activation proceeds only at the PM, consistent with activated N-Ras–GTP being palmitoylated. Finally, palmitoylation-deficient N-Ras does not sustain EGF (epidermal growth factor) or serum-elicited mitogenic signalling, confirming that palmitoylation is essential for signal transduction by N-Ras. These findings document that N-Ras activation proceeds at the PM and suggest that depalmitoylation, by removing Ras from the PM, may contribute to the shutdown of Ras signalling.