G protein alpha subunits are often myristoylated and/or palmitoylated near their amino terminus. The G protein alpha subunit in the yeast Saccharomyces cerevisiae (GPA1 gene product, Gpa1p) is known to be myristoylated, and this modification is essential for G protein activity in vivo. Here we examined whether Gpa1p is palmitoylated and determined the functional consequences of this modification. [3H]-Palmitic acid was incorporated into Gpa1p in cells expressing myc-tagged Gpa1p or Gpa1p-Gst. The label was released upon hydroxylamine treatment. Substitution of the conserved Cys 3 for Ser blocked incorporation of the label (Gpa1pC3S). Palmitoylation was also blocked by a mutation that prevents myristoylation (Gly2Ala), whereas the palmitoylation-site mutation had no effect on myristoylation of Gpa1p. Gpa1pC3S complemented the gpa1 delta mutation in vivo and formed a complex with G beta gamma that was able to undergo nucleotide exchange in vitro. However, basal and pheromone-induced FUSl-lacZ transcription were 2-5-fold higher in the C3S mutant. Pheromone-induced growth arrest was also enhanced by the mutation, but recovery from arrest was not affected. Like wild-type Gpa1p, the C3S mutant was predominantly membrane-associated. Upon Triton X-114 partitioning or high pH treatment, no difference in the membrane-binding properties of the wild-type Gpa1p and the C3S mutant was detected. By sucrose density gradient centrifugation of membranes, however, most of the mutant protein was mislocalized to a non-plasma membrane compartment, whereas G beta gamma localization was unaltered. Taken together, our data suggest that Gpa1p is palmitoylated via a thioester bond at Cys 3 and that palmitoylation plays a role in modulating Gpa1p signaling and membrane localization.