Mammalian H-Ras and N-Ras are GTP-binding proteins that must be post-translationally lipidated to function as molecular switches in signal transduction cascades controlling cell growth and differentiation. These proteins contain a C-terminal farnesyl-cysteine alpha-methyl ester and palmitoyl groups attached to nearby cysteines. Data is presented showing that rat liver microsomes contain an enzyme that transfers the palmitoyl group from palmitoyl-coenzyme A to cysteine residues of H-Ras protein and of a synthetic peptide having the structure of the C terminus of N-Ras. This protein palmitoyltransferase (PPT) was solubilized from membranes and purified 10,500-fold to apparent homogeneity with an overall yield of 10%. On an SDS gel, PPT appears as two proteins of molecular masses of approximately 30 and approximately 33 kDa. If the palmitoylation sites of the N-Ras peptide (the non-farnesylated cysteine) or H-Ras protein (cysteines 181 and 184) are changed to serine, palmitoylation by PPT does not occur. Non-farnesylated H-Ras produced in bacteria as well as in vitro farnesylated bacterial H-Ras are not substrates for PPT nor is the non-farnesylated, methylated N-Ras peptide. These results suggest, but do not prove, that farnesylation and possibly C-terminal methylation are prerequisites for Ras palmitoylation. PPT shows a large preference for palmitoyl-coenzyme A over myristoyl-coenzyme as the acyl donor. Values of Km for palmitoyl-CoA and H-Ras are 4.3 +/- 1.2 and 0.8 +/- 0.3 microM, respectively. PPT is the first protein palmitoyltransferase to be purified, and the availability of pure enzyme should contribute to our understanding of the function and regulation of Ras palmitoylation in cells.