In the human fungal pathogen Cryptococcus neoformans, Ras signaling mediates sexual differentiation, morphogenesis, and pathogenesis. By studying Ras prenylation and palmitoylation in this organism, we have found that the subcellular localization of this protein dictates its downstream signaling specificity. Inhibiting C. neoformans Ras1 prenylation results in the defective general membrane targeting of this protein and the loss of all Ras function. In contrast, palmitoylation mediates localization of Ras1 to the plasma membrane and is required for normal morphogenesis and survival at high temperatures. However, palmitoylation and plasma membrane localization are not required for Ras-dependent sexual differentiation. Likely as a result of its effect on thermotolerance, Ras1 palmitoylation is also required for the pathogenesis of C. neoformans. These data support an emerging paradigm of compartmentalized Ras signaling. However, our studies also demonstrate fundamental differences between the Ras pathways in different organisms that emphasize the functional flexibility of conserved signaling cascades.