Isoprenylated proteins bear an isoprenylcysteine methyl ester at the C terminus. Although isoprenylated proteins have been implicated in meristem development and negative regulation of abscisic acid (ABA) signaling, the functional role of the terminal methyl group has not been described. Here, we show that transgenic Arabidopsis thaliana plants overproducing isoprenylcysteine methyltransferase (ICMT) exhibit ABA insensitivity in stomatal closure and seed germination assays, establishing ICMT as a negative regulator of ABA signaling. By contrast, transgenic plants overproducing isoprenylcysteine methylesterase (ICME) exhibit ABA hypersensitivity in stomatal closure and seed germination assays. Thus, ICME is a positive regulator of ABA signaling. To test the hypothesis that ABA signaling is under feedback regulation at the level of isoprenylcysteine methylation, we examined the effect of ABA on ICMT and ICME gene expression. Interestingly, ABA induces ICME gene expression, establishing a positive feedback loop whereby ABA promotes ABA responsiveness of plant cells via induction of ICME expression, which presumably results in the demethylation and inactivation of isoprenylated negative regulators of ABA signaling. These results suggest strategies for metabolic engineering of crop species for drought tolerance by targeted alterations in isoprenylcysteine methylation.