Protein farnesyltransferase (FTase) catalyzes the transfer of the hydrophobic farnesyl group from farnesyl diphosphate (FPP) to cellular proteins such as Ras at a cysteine residue near their carboxy-terminus. This process is necessary for the subcellular localization of these proteins to the plasma membrane and is required for the transforming activity of oncogenic variants of Ras, making FTase a prime target for anticancer therapeutics. The high-resolution crystal structure of rat FTase was recently determined, and we present here the X-ray crystal structure of the first complex of FTase with a FPP substrate bound at the active site. The isoprenoid moiety of FPP binds in an extended conformation in a hydrophobic cavity of the beta subunit of the FTase enzyme, and the diphosphate moiety binds to a positively charged cleft at the top of this cavity near the subunit interface. The observed location of the FPP molecule is consistent with mutagenesis data. This binary complex of FTase with FPP leads us to suggest a "molecular ruler" hypothesis for isoprenoid substrate specificity, where the depth of the hydrophobic binding cavity acts as a ruler discriminating between isoprenoids of differing lengths. Although other length isoprenoids may bind in the cavity, only the 15-carbon farnesyl moiety binds with its C1 atom in register with a catalytic zinc ion as required for efficient transfer to the Ras substrate.