Mammary carcinogenesis induced through expression of activated Raf was investigated using a model in which retroviral vectors were infused into the central ducts of rat mammary glands. This model allows efficient expression of experimental proteins in a small fraction of endogenous mammary epithelial cells in situ. We previously reported that Raf is the dominant oncogenic signaling pathway from activated Ras in rat mammary glands. We show here that mammary gland carcinogenesis is rapidly induced by the expression of c-Raf-1 kinase that is activated by N-terminal truncation (Delta-Raf). Interestingly, targeting Raf to the plasma membrane via C-terminal fusion with Ras membrane localization signals (Raf-Caax) induces Raf kinase activity that transforms 3T3 cells more frequently than Delta-Raf, yet in situ expression of Raf-Caax does not induce mammary carcinomas. To investigate these contrasting results and begin elucidating the mechanisms of Raf-induced mammary carcinogenesis, we combined both activating mutations (N-terminal truncation and C-terminal membrane localization motifs) in one Raf construct (Delta-Raf-Caax). While Delta-Raf-Caax transforms 3T3 cells more efficiently than Delta-Raf or Raf-Caax, in situ expression of Delta-Raf-Caax does not induce carcinomas in vivo, demonstrating that lipid modification on the C-terminus of Delta-Raf negates its oncogenic potential in rat mammary gland.