RHO family proteins are important for the function of inflammatory cells. They are modified with a 20-carbon geranylgeranyl lipid in a process catalyzed by protein geranylgeranyltransferase type I (GGTase-I). Geranylgeranylation is viewed as essential for the membrane targeting and activity of RHO proteins. Consequently, inhibiting GGTase-I to interfere with RHO protein activity has been proposed as a strategy to treat inflammatory disorders. However, here we show that mice lacking GGTase-I in macrophages develop severe joint inflammation resembling erosive rheumatoid arthritis. The disease was initiated by the GGTase-I–deficient macrophages and was transplantable and reversible in bone marrow transplantation experiments. The cells accumulated high levels of active GTP-bound RAC1, CDC42, and RHOA, and RAC1 remained associated with the plasma membrane. Moreover, GGTase-I deficiency activated p38 and NF-κB and increased the production of proinflammatory cytokines. The results challenge the view that geranylgeranylation is essential for the activity and localization of RHO family proteins and suggest that reduced geranylgeranylation in macrophages can initiate erosive arthritis.