Prenylation is a class of lipid modification involving covalent addition of either farnesyl (15-carbon) or geranylgeranyl (20-carbon) isoprenoids to conserved cysteine residues at or near the C-terminus of proteins. Known prenylated proteins include fungal mating factors, nuclear lamins, Ras and Ras-related GTP-binding proteins (G proteins), the subunits of trimeric G proteins, protein kinases, and at least one viral protein. Prenylation promotes membrane interactions of most of these proteins, which is not surprising given the hydrophobicity of the lipids involved. In addition, however, prenylation appears to play a major role in several protein-protein interactions involving these species. The emphasis in this review is on the enzymology of prenyl protein processing and the functional significance of prenylation in cellular events. Several other recent reviews provide more detailed coverage of aspects of prenylation that receive limited attention here owing to length restrictions (1-4).