Activation of growth factor receptors results in tyrosine autophosphorylation and recruitment of SH2 domain-containing effectors, including Grb2. Grb2 recruitment mediates activation of the Ras nucleotide exchanger Sos by an unknown mechanism. To examine the role of membrane recruitment, we prepared Sos derivatives containing either myristoylation or farnesylation signals. This resulted in plasma membrane targeting of Sos and stimulation of the Ras signaling pathway, including ERK and AP-1 activities leading to oncogenic transformation. Sos derivatives with nonfunctional myristoylation or farnesylation sequences were inactive. Farnesylation of Sos also activated Ras signaling in yeast. In both mammalian cells and yeast, membrane-targeted Sos derivatives lacking the C-terminal region were considerably more active. Therefore, targeting of Sos to the plasma membrane in the vicinity of Ras appears to be the primary mechanism leading to activation of the Ras pathway. A secondary mechanism could involve relief of the inhibitory effect of the Sos C-terminal region.