Rab proteins in mammalian cells, or Ypt1p and Sec4p in yeast, regulate vesicular traffic. Prenylation of these small GTP-binding proteins is required for membrane attachment and subsequent biological activity. Yeast protein geranylgeranyltransferase type-II (PGGTase-II) catalyzes the prenylation of Ypt1p in the presence of an escort protein, Msi4p. The genes encoding the alpha-(BET4) and beta-(BET2) subunits of PGGTase-II were translationally coupled by overlapping the BET4-BET2 stop/start codons and by adding a ribosome-binding site near the 3'-end of BET4 that fused an -EEF C-terminal alpha-tubulin epitope to Bet4p. Active recombinant heterodimer was purified by chromatography on DE52 and anti-alpha-tubulin columns. Recombinant Msi4p with an N-terminal polyhistidine leader was purified on a Ni(2+)-Sepharose column, followed by gel filtration and ion exchange chromatography. An escort protein, Msi4p, was necessary for geranylgeranylation of Ypt1p by yeast PGGTase-II. Michaelis constants for GGPP and Ypt1p were 1.6 and 1.1 microM, respectively; Vmax = 1.7 nmol min-1 mg-1 for yeast PGGTase-II. Typical Michaelis-Menten behavior was also seen for the enzyme for varied concentrations of Msi4p, with a maximal catalytic activity seen for a 10-fold excess of escort protein over enzyme. In contrast to previous reports, PGGTase-II requires both Zn2+ and Mg2+ for maximal activity, although Zn2+ becomes inhibitory at concentrations above approximately 10 microM. Prenylated Ypt1p obtained after incubation of Ypt1p with PGGTase-II, Msi4p, and geranylgeranyl diphosphate was digested with trypsin. The C-terminal peptide fragment from modified Ypt1p was purified by HPLC and analyzed by electrospray mass spectrometry. The mass of the fragment is consistent with the 12-mer C-terminal amino acid fragment predicted from proteolysis by trypsin with both cysteine residues modified by geranylgeranyl moieties.