Membrane localization of p21ras is dependent upon its posttranslational modification by a 15-carbon farnesyl group. The isoprenoid is linked to a cysteine located within a conserved carboxyl-terminal sequence termed the "CAAX" box (where C is cysteine, A is an aliphatic amino acid, and X is any amino acid). We now show that three GTP-binding proteins encoded by the recently identified rac1, rac2, and ralA genes also undergo isoprenoid modification. cDNAs coding for each protein were transcribed in vitro, and the RNAs were translated in reticulocyte lysates. Incorporation of isoprenoid precursors, [3H]mevalonate or [3H]farnesyl pyrophosphate, indicated that the translation products were modified by isoprenyl groups. A protein recognized by an antibody to rac1 also comigrated with a protein metabolically labeled by a product of [3H] mevalonate in cultured cells. Gel permeation chromatography of radiolabeled hydrocarbons released from the rac1, rac2, and ralA proteins by reaction with Raney nickel catalyst indicated that unlike p21Hras, which was modified by a 15-carbon moiety, the rac and ralA translation products were modified by 20-carbon isoprenyl groups. Site-directed mutagenesis established that the isoprenylated cysteines in the rac1, rac2, and ralA proteins were located in the fourth position from the carboxyl terminus. The three-amino acid extension distal to the cysteine was required for this modification. The isoprenylation of rac1 (CSLL), ralA (CCIL), and the site-directed mutants rac1 (CRLL) and ralA (CSIL), demonstrates that the amino acid adjacent to the cysteine need not be aliphatic. Therefore, proteins with carboxyl-terminal CXXX sequences that depart from the CAAX motif should be considered as potential targets for isoprenoid modification.