Most Ras proteins are posttranslationally modified by a palmitoyl lipid moiety through a thioester linkage. However, the mechanism by which this occurs is not known. Here, evidence is presented that the Ras2 protein of Saccharomyces cerevisiae is palmitoylated by a Ras protein acyltransferase (Ras PAT) encoded by the ERF2 and ERF4 genes. Erf2p is a 41-kDa protein localized to the membrane of the endoplasmic reticulum and contains a conserved DHHC cysteine-rich domain (DHHC-CRD). Erf2p co-purifies with Erf4p (26 kDa) when it is expressed in yeast or in Escherichia coli. The Erf2p/Erf4p complex is required for Ras PAT activity, and mutations within conserved residues (Cys(189), His(201), and Cys(203)) of the Erf2p DHHC-CRD domain abolish Ras PAT activity. Furthermore, a palmitoyl-Erf2p intermediate is detected suggesting that Erf2p is directly involved in palmitate transfer. ERF2 and ERF4 are the first genes identified that encode a palmitoyltransferase for a Ras GTPase.