Ras proteins are post-translationally modified by farnesylation. In the present investigation, we identified an activity in crude soluble extracts of yeast cells that catalyzes the transfer of a farnesyl moiety from farnesyl pyrophosphate to yeast RAS2 protein. RAS2 proteins having a C-terminal Cys-Ali-Ali-Xaa sequence (where Ali is an aliphatic amino acid and Xaa is the unspecified C-terminal amino acid) served as substrates for this reaction, whereas RAS2 proteins with an altered or deleted Cys-Ali-Ali-Xaa sequence did not. A yeast mutant, dpr1/ram1, originally isolated as a Ras-processing mutant was shown to be defective in farnesyltransferase activity. In addition, another mutant, ram2, also was defective in the transferase activity. These results demonstrate that at least two genes, DPR1/RAM1 and RAM2, are required for the farnesyltransferase activity in yeast.