Integrin α6β4 signaling proceeds through Src family kinase (SFK)–mediated phosphorylation of the cytoplasmic tail of β4, recruitment of Shc, and activation of Ras and phosphoinositide-3 kinase. Upon cessation of signaling, α6β4 mediates assembly of hemidesmosomes. Here, we report that part of α6β4 is incorporated in lipid rafts. Metabolic labeling in combination with mutagenesis indicates that one or more cysteine in the membrane-proximal segment of β4 tail is palmitoylated. Mutation of these cysteines suppresses incorporation of α6β4 in lipid rafts, but does not affect α6β4-mediated adhesion or assembly of hemidesmosomes. The fraction of α6β4 localized to rafts associates with a palmitoylated SFK, whereas the remainder does not. Ligation of palmitoylation-defective α6β4 does not activate SFK signaling to extracellular signal–regulated kinase and fails to promote keratinocyte proliferation in response to EGF. Thus, compartmentalization in lipid rafts is necessary to couple the α6β4 integrin to a palmitoylated SFK and promote EGF-dependent mitogenesis.