Post-translational modification of proteins with hydrophobic lipid-derived substituents is increasingly becoming recognized as a major route for targeting proteins to membranes. Glycosylphosphatidylinositol (GPI) anchors are found at the C terminus of a wide range of cell surface proteins, and may endow the cell with the ability to release them in a controlled fashion via specific phospholipases. We have concentrated on the direct attachment (acylation) of long-chain fatty acids (myristate, C14:0 and palmitate, C16:0) to proteins associated with the cytoplasmic face of cellular membranes. Two such proteins, the products of the src and ras oncogenes, require acylation respectively with myristate and palmitate for their membrane association and biological activity, including transformation. N-terminal myristoylation of p60src seems to be a cotranslational stable modification. However, our recent results show that post-translational modification of p21ras is a complex cascade of events involving proteolysis, methylation and thioesterification of palmitate. This last acylation event is dynamic in vivo and may regulate ras function. Enzymological studies of these modification events are in progress. A better understanding of acylation may provide targets for future pharmacological intervention.