Farnesylation of Ras occurs in vivo on a Cys residue in the C-terminal sequence -Cys-Val-Leu-Ser (termed a CAAX box). This modification is required for Ras membrane localization and cell transforming activity. Using [3H]farnesyl-PPi as precursor and Escherichia coli-expressed Ras, forms of Ras having the CAAX sequence were radiolabeled upon incubation with the cytosolic fraction of bovine brain. Forms of Ras having a deletion of the CAAX sequence or a Cys to Ser substitution in this sequence were not substrates. Radioactivity incorporated into Ras by bovine brain cytosol was released by treatment with iodomethane but not with methanolic KOH indicating a thioether linkage. High pressure liquid chromatography analysis of the cleavage products on a C-18 column showed a major peak of radioactivity that co-eluted with a farnesol standard. The enzyme responsible for Ras farnesylation in bovine brain was approximately 190 kDa as estimated by gel filtration and required a divalent cation for activity. Nonradioactive farnesyl-PPi, geranylgeranyl-PPi, and Ras peptides having the C-terminal sequence -Cys-Val-Leu-Ser competed in the assay with IC50 values of 0.7, 1.4, and 1-3 microM, respectively. Farnesol and Ras peptides having the sequence -Ser-Val-Leu-Ser were not inhibitory. These results identify a farnesyl-protein transferase activity that may be responsible for the polyisoprenylation of Ras in intact cells.