Different sites of plasma membrane attachment may underlie functional differences between isoforms of Ras. Here we show that palmitoylation and farnesylation targets H-ras to lipid rafts and caveolae, but that the interaction of H-ras with these membrane subdomains is dynamic. GTP-loading redistributes H-ras from rafts into bulk plasma membrane by a mechanism that requires the adjacent hypervariable region of H-ras. Release of H-ras-GTP from rafts is necessary for efficient activation of Raf. By contrast, K-ras is located outside rafts irrespective of bound nucleotide. Our studies identify a novel protein determinant that is required for H-ras function, and show that the GTP/GDP state of H-ras determines its lateral segregation on the plasma membrane.