In order to study the role of signal transduction pathways in the regulation of morphology in Neurospora crassa, we cloned and characterized a ras homologue, termed NC-ras2. The predicted protein product of this gene is composed of 229 amino acid residues and contains all the consensus sequences shared by the ras protein family. The gene is located in linkage group V. An NC-ras2 disruptant showed morphological characteristics very similar to those of the smco7 mutant, which also maps to linkage group V. Nucleotide sequence analysis revealed that the smco7 mutant harbored a single base deletion in the NC-ras2 gene, which is predicted to result in the truncation of the protein product. Introduction into the smco7 mutant of an NC-ras2 clone yielded stable transformants with a wild-type phenotype. The smco7 mutant exhibited very slow hyphal growth and the rate of conidial formation was approximately one two-hundredth of wild type. The smco7 mutation causes both the changes in the pattern of hyphal growth and the defects in cell wall synthesis. Both the diameter and the length of the apical compartment were shorter in the hyphae of the smco7 mutant. These results suggest that NC-ras2 is identical to smco7, and that the signal transduction pathway mediated by the NC-ras2 protein regulates the apical growth of hyphae, cell wall synthesis, and conidial formation in N. crassa.