Cells of the budding yeast Saccharomyces cerevisiae bud at either axial or bipolar sites depending on their cell type. Bud-site selection directs both cell polarity and the cytoskeletal orientation during budding and is determined by at least five genes: BUD1/RSR1, BUD2, BUD3, BUD4 and BUD5. Mutants defective in BUD1, BUD2 or BUD5 choose bud sites randomly. Bud1 protein (Bud1p) has sequence similarity to Ras, a small GTP-binding protein, and Bud5p is similar to Cdc25p (refs 4, 5), a GDP-GTP exchange factor. Here we report that Bud2p is a GTPase-activating protein (GAP) for Bud1p with a sequence similar to the catalytic domain of rasGAPs, and that Bud2p purified from yeast stimulates GTP hydrolysis by Bud1p. Chromosomal deletion of BUD2 causes a random budding pattern but no obvious growth defect. Overexpression of BUD2 also causes a random budding pattern by wild-type cells.