Eukaryotic polypeptides synthesized with one of at least three types of cysteine-containing carboxyl-terminal sequences are candidates for posttrans lational modification reactions including isoprenylation, proteolytic cleavage, and methyl esterification. The major class of these proteins is formed by those that have precursor C-terminal sequences of-CXXX, in which the penulti mate residue is generally aliphatic. Polypeptides with a terminal residue such as leucine are initially modified by a cytosolic isoprenyltransferase that transfers the C20 group from geranylgeranyl pyrophosphate to the cysteine sulfur atom. Alternatively, polypeptides synthesized with terminal residues such as serine, alanine, methionine, or glutamine are modified by a distinct cytosolic enzyme that utilizes farnesyl pyrophosphate to add the CIS isoprenyl group to the cysteine side chain. Following this step, the three terminal amino acids are cleaved by a cytosolic or membrane-bound protease. Finally, a membrane-bound enzyme catalyzes the S-adenosylmethionine-dependent addition of a methyl group to the newly exposed a-carboxyl group of the cysteine residue. The net effect of these modifications is the creation of a C-terminal S-isoprenyl cysteine a-methyl ester (Figure 1). A second type of processing occurs in at least one protein with a C-terminal-CXC precursor sequence. Here both cysteine residues are modified by geranylgeranylation and the carboxy-terminus is methyl esterified. Finally, proteins with certain C-terminal-CC precursor sequences can be modified by the addition of geranylgeranyl group to one or both of the cysteine residues. Polypeptides containing these precursor sequence motifs include the ras proteins and many of the other small G-proteins, the'Y-subunits of the large G-proteins, some of the nuclear lamins, thc rctinal cGMP phosphodiesterase, and several fungal mating pheromones. Many of these protein species func tion in signal transduction processes across the plasma membrane or in the control of cell division. At present, the specific utility to the cell of each of the C-terminal modification reactions is not clear. Possibly, the increased hydrophobicity of the C-terminus can lead to interactions with the membrane bilayer that result in membrane association of these proteins. Alternatively, the isoprenyl and methyl groups may be specific targets for binding by other membrane (or cytosolic)" receptor" proteins, leading to a specific alignment of protein partners in signalling pathways or in structural arrays. Recent reviews in this area include those of Glomset et al (1), Maltese (2), and Sinensky & Lutz (2a), on protein isoprenylation, Rine & Kim (3) and Der & Cox (4) on ras isoprenylation and membrane association, Gibbs (5) on ras C-terminal processing enzymology, and Barten & O'Dea (6) on protcin carboxyl methylation.