The prenylation of several proteins involved in oncogenesis and signal transduction plays an essential role in regulating their biological activities. Two distinct isoprenoids are known to be involved in this modification, the 15-carbon farnesyl and 20-carbon geranylgeranyl groups. Thus far, identified farnesylated proteins contain methionine or serine at the COOH terminus, while those modified by geranylgeranyl end in leucine. This report describes the characterization of an enzyme activity that transfers the geranylgeranyl group to candidate proteins. The enzyme, termed a "protein geranylgeranyltransferase," exhibits a marked preference for substrate proteins that contain leucine at the COOH terminus. In fact, the enzyme will efficiently modify a normally farnesylated protein, Ha-ras, if its COOH-terminal amino acid is switched from serine to leucine. Additional studies characterize this enzyme and suggest that it is responsible for the geranylgeranyl modification of a number of GTP-binding proteins (or their subunits) that contain a consensus prenylation sequence ending in leucine.