Rheb (Ras-homolog enriched in brain) is a component of the phosphatidylinositol 3-kinase (PI3K) target of rapamycin (TOR) signaling pathway, functioning as a positive regulator of TOR. Constitutively active mutants of Rheb induce oncogenic transformation in cell culture. The transformed cells are larger and contain more protein than their normal counterparts. They show constitutive phosphorylation of the ribosomal protein S6 kinase and the eukaryotic initiation factor 4E-binding protein 1, two downstream targets of TOR. The TOR-specific inhibitor rapamycin strongly interferes with transformation induced by constitutively active Rheb, suggesting that TOR activity is essential for the oncogenic effects of mutant Rheb. Rheb-induced transformation is also dependent on a C-terminal farnesylation signal that mediates localization to a cellular membrane. An engineered N-terminal myristylation signal can substitute for the farnesylation. Immunofluorescence localizes wild-type and mutant Rheb to vesicular structures in the cytoplasm, overlapping with the endoplasmic reticulum.