Ras proteins can be modified at their COOH-terminal cysteine in the motif Cys-Ali-Ali-Xaa by a farnesyl isoprenoid. This modification is essential for membrane association and biological activity of ras proteins. A similar COOH-terminal amino acid sequence, Cys-Xaa-Ali-Xaa, exists in the ras-related GTP-binding proteins rac 1 and rac 2. To determine whether these proteins were similarly modified, COS cells were transfected with rac 1 and rac 2 cDNA and expressed proteins were labeled with [3H]mevalonic acid. We report here that both rac 1 and rac 2 are post-translationally modified by addition of an isoprenoid group, the likely site of which is the COOH-terminal cysteine. Isoprenylation was found only in racs associated with particulate cell fractions, suggesting that this modification may be associated with membrane localization of the proteins. These data specifically identify mammalian low molecular mass GTP-binding proteins other than ras that undergo post-translational modification and further define the COOH-terminal consensus sequence, Cys-Ali-Ali-Xaa, as an isoprenylation signal. This sequence may identify a larger family of low molecular mass GTP-binding proteins which are isoprenylated.