Subcellular localization of Ras proteins to the plasma membrane is accomplished in part by covalent attachment of a farnesyl moiety to the conserved CaaX box cysteine. Farnesylation targets Ras to the endoplasmic reticulum (ER), where additional processing steps occur, resulting in translocation of Ras to the plasma membrane. The mechanism(s) by which this occurs is not well understood. In this report, we show that plasma membrane localization of Ras2p in Saccharomyces cerevisiae does not require the classical secretory pathway or a functional Golgi apparatus. However, when the classical secretory pathway is disrupted, plasma membrane localization requires Erf2p, a protein that resides in the ER membrane and is required for efficient palmitoylation of Ras2p. Deletion of ERF2 results in a Ras2p steady-state localization defect that is more severe when combined with sec-ts mutants or brefeldin A treatment. The Erf2p-dependent localization of Ras2p correlates with the palmitoylation of Cys-318. An Erf2p-Erf4p complex has recently been shown to be an ER-associated palmitoyltransferase that can palmitoylate Cys-318 of Ras2p (S. Lobo, W. K. Greentree, M. E. Linder, and R. J. Deschenes, J. Biol. Chem. 277:41268-41273, 2002). Erf2-dependent palmitoylation as well as localization of Ras2p requires a region of the hypervariable domain adjacent to the CaaX box. These results provide evidence for the existence of a palmitoylation-dependent, nonclassical endomembrane trafficking system for the plasma membrane localization of Ras proteins.