The frequent detection of mutated ras genes in a variety of cancers (reviewed in Bos, 1988, 1989; Der, 1988) suggests that ras makes a significant contribution to human malignancies (reviewed in Barbacid, 1987; Lacal and Tronick, 1988; Der, 1989). While the role of ras in malignancy is unclear, it is well-established that the association of ras protein with the inner surface of the plasma membrane is critical for triggering ras oncogenicity. The trafficking of ras proteins to the plasma membrane requires a series of three closely linked posttranslational modifications (farnesylation, proteolysis, and carboxymethylation) that are signaled by the consensus C-terminal CAAX motif present on all ras proteins (reviewed in Rine and Kim, 1990; Gibbs, 1991; Der and Cox, 1991). THe recent discovery that an essential intermediate in cholesterol biosynthesis, the isoprenoid farnesol, is attached covalently to ras proteins has stimulated considerable interest and has identified important new directions for studies of ras function. First, understanding the role of farnesol-linked interactions with the plasma membrane may identify the biochemical basis for the oncogenic actions of ras proteins. Second, the enzymes that catalyze the processing steps that trigger membrane association of ras proteins are promising targets for pharmacologic intervention in ras-associated disease. In this review, we summarize our current knowledge of the role of posttranslational processing in ras-membrane interaction and transforming activity. We also provide an update of recent studies addressing the role of isoprenoid modification in the function of ras and of other isoprenoid-modified proteins (reviewed in James and Olson, 1990; Glomset et al., 1990; Maltese, 1990). While this role is likely to be specific for each protein, ras proteins can provide an excellent prototype for understanding the role of isoprenoid modification in protein function.